Gold Fields and its offspring Sibanye — interim earnings tell a tale of two contrasting mining operations

Sibanye-Stillwater CEO Neal Froneman poses for a photograph following an interview in Johannesburg on Friday, Oct. 25, 2019. (Photo: Waldo Swiegers/Bloomberg via Getty Images)

By Ed Stoddard

25 Aug 2022

Gold Fields cashed in on a slightly higher gold price for the period under review and a 9% increase in production, while Sibanye was hobbled by the strike at its South African gold mining operations and regional flooding near its platinum group metals (PGMs) operations in the US state of Montana.

Gold Fields and its growing offspring Sibanye-Stillwater unveiled interim results on Thursday. Gold Fields’ earnings rose while Sibanye’s declined, though off record levels. And both companies are paying tidy dividends. Sibanye’s earnings were hurt by the strike at its SA gold mines, underscoring the risks of the labour-intensive domestic environment which Gold Fields eliminated from its portfolio.

Gold Fields cashed in on a slightly higher gold price for the period under review and a 9% increase in production, translating into a 16% rise in normalised earnings to just shy of $500-million and an interim dividend of 300 SA cents per share.

Sibanye, by contrast, was hobbled by the three-month strike at its South African gold mining operations and regional flooding near its platinum group metals operations in the US state of Montana. The company’s South African gold production was 63% lower year on year, which clearly did not help its bottom line.

“Profit for the period of R12.3-billion ($803-million) was 51% lower than record profit for H1 2021 of R25.3-billion ($1.7-billion),” Sibanye said.

Still, it was the group’s third-highest six-month profit since it listed in 2013 and an interim dividend of $230-million was declared. It’s hard to top a record year when profits were lifted by record prices.

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Sibanye began life as a spinoff from Gold Fields, which a decade ago under the previous CEO, Nick Holland, embarked on a strategy to globally diversify its operations and pivot away from labour-intensive shafts to mechanisation. That was when South Africa’s mining sector was being rocked by the rise of the Association of Mineworkers and Construction Union (Amcu), which triggered waves of often violent labour unrest.

Gold Fields CEO Chris Griffith. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

“For Gold Fields, this has highlighted that our internationalisation strategy that was undertaken more than 10 years ago has really paid dividends for the group. The move away from narrow reef, conventional mining methods to a more mechanised approach right across its business were very good strategies,” Gold Fields CEO Chris Griffith, who also led a move to mechanisation when he was at the helm of Anglo American Platinum, said on a media conference call.

The recent gold strike at Sibanye was not marred by violence as Amcu and its former arch-rival, the National Union of Mineworkers, joined forces, burying the lethal enmity of the past. But the strike still highlights the risk, from an investment perspective, of South Africa’s labour-intensive mining operations.

The unions would counter that it underscores Sibanye’s intransigence at the bargaining table. And the peaceful nature of recent industrial action is a “de-risking” trend, to use the corporate lingo.

Sibanye-Stillwater CEO Neal Froneman. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

Both companies are in good financial nick and have expansion plans that are still playing out. Gold Fields remains in the process of trying to complete its proposed acquisition of the Canadian miner Yamana. This move, seen as crucial to the company’s production growth, has had some shareholder pushback, which the company has attempted to counter with the prospect of higher dividends and a potential secondary listing in Toronto.

Sibanye, for its part, has been expanding from gold to PGMs to green metals though its CEO, Neal Froneman, said rising battery metals prices would probably temper the thrust for now. DM/BM

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