Integrated Annual Report 2014

Financial capital


Financial capital includes the revenues we generate from the production and sale of gold in the global markets, the capital we raise through public or private equity or debt financing, and further development of our business through capital investment in new projects or operations.

Sibanye is a proudly South African mining group, which is leveraging its high-quality, cash-generative gold operations in South Africa in order to pay shareholders industry leading dividends and make value-accretive investments in order to sustain the dividends.

What we mean...

  • Our dividend policy is to pay between 25% and 35% of normalised earnings to shareholders in order to maintain an industry leading dividend yield.
  • In order to sustain our cash flow and dividend, we endeavour to extend the operating life of the Group through appropriate, value-accretive consolidation and investment in new projects.
  • We recognise the role of all stakeholders in ensuring the sustainability of our business. A successful, sustainable business will ensure optimal returns for all stakeholders, particularly in the South African context where employees, communities, government and society as a whole continue to rely heavily on the mining industry.
  • We will focus on safe, efficient, quality mining and manage costs in order to realise full value from our high-quality, long-life assets.
Sibanye's share price: 31 December 2013 to December 2014 [chart]


In 2014, we produced 49,432kg (1.59Moz) – 2013: 44,474kg (1.43Moz) – of gold, generating gold sales revenue of R21.8 billion (2013: R19.3 billion).

The average gold price received was R440,615/kg, up 1% year on year from R434,663/kg in 2013, despite a 10% decline in the average dollar gold price received. The average R/US$ exchange rate was R10.82/US$ (2013: R9.60/US$), which is 13% weaker than it was in 2013.

Given the uncertain economic environment and volatile gold price, we continue to pursue a judicious approach to managing debt. During 2014,borrowings (excluding Burnstone Debt) remained unchanged at R2.0 billion.

Tonnes 2014 2013
Mine production 3,114.4 3,050.7
Net producer hedging 42.1 (39.3)
Total mine supply3,156.53,011.4
Recycled gold1,121.71,262.0
Total supply4,278.24,273.4
Sub-total above fabrication2,541.92,792.8
Total bar and coin demand1,063.61,765.4
ETFs and similar products2(159.1)(880.0)
Central bank net purchases3477.2409.3
Gold demand3,923.64,087.5
OTC investment and stock flows4354.6185.9
Total demand4,278.24,273.4
  • Source: World Gold Council
  • 1 Fabrication is the first transformation of gold bullion into a semi-finished or finished product. Jewellery consumption is equal to fabrication plus/minus jewellery imports/exports plus/ minus stocking/de-stocking by distributors and manufacturers. On an annual basis, the consumption and fabrication data series will reconcile.
  • 2 Exchange traded funds (ETFs) and similar products include Gold Bullion Securities (London), Gold Bullion Securities (Australia), SPDR® Gold Shares (formerly streetTRACKS Gold Shares), NewGold Gold Debentures, iShares Comex Gold Trust, ZKB Gold ETF, GOLDIST, ETF Securities Physical Gold, ETF Securities (Tokyo), ETF Securities (NYSE), XETRA-GOLD, Julius Baer Physical Gold, Central Fund of Canada and Central Gold Trust, Swiss Gold, iShares Gold Bullion Fund (formerly Claymore Gold Bullion ETF), Sprott Physical Gold Trust, ETF Securities Glitter, Mitsubishi Physical Gold ETF and iShares Gold CH.
  • 3 Excluding any delta hedging of central bank options
  • 4 Partly a statistical residual, this data is largely reflective of demand in the opaque over-the-counter (OTC) market with an additional contribution occasionally from changes to fabrication inventories.


In compliance with the MPRDA and the associated Mining Charter, HDSA suppliers to Sibanye are accorded preferred-supplier status subject to their competitiveness quality and BEE status.

The Mining Charter requires that mining companies procure at least 40% of their capital goods, 50% of their consumables and 70% of their services from BEE suppliers by 2014. All the targets were met at the Cooke, Driefontein and Kloof operations. Beatrix achieved target in terms of capital and consumables but not for services (69% was achieved in this category).

In creating an enabling environment for local entrepreneurs, Sibanye has developed and implemented an online registration system – the Sibanye Gold Vendor Portal – for all prospective suppliers.

The online system has been temporarily suspended to implement changes that would ease registration, particularly for local small, medium and micro enterprises. The system is due to go live at the end of March 2015. In the meantime, vendors are registered on a database managed by our Vendor Department. We have also appointed an external service provider to visit communities and help vendors to register.

Procurement expenditure by Sibanye amounted to R11 billion (2013: R9 billion) in 2014, of which R5.5 billion (2013: R5.1 billion) related to discretionary spend. Non-discretionary spend includes expenditure on parastatal entities, banks and government departments, among others. Of the discretionary spend during 2014, 66% (R4.68 billion) was spent with BEE suppliers – 56% (R2.9 billion) in 2013. This spend includes all operations and service departments. Non-discretionary spend refers to all areas where we cannot influence the shareholding of the entity, such as parastatals, financial institutions, training and education entities, and intercompany transfers. Discretionary (procurement) spend refers to all spend excluding non-discretionary spend.

BEE procurement: Capital goods as at 31 December 2014 (%) [chart]
BEE procurement: Consumable goods as at 31 December 2014 (%) [chart]
BEE procurement: Services as at 31 December 2014 (%) [chart]

Sustaining dividends

Our focus on paying shareholders superior dividends, supported by an inclusive and firm approach to stakeholder relations, underpins and informs our corporate strategy and decisions.

Consistent with our commitment to prioritise dividends, a dividend of 112 South African cents per share (2013: 112) was declared for 2014 – a yield of 3.7% at 18 February 2015.

The dividend was equivalent to 44% of normalised earnings, based on the total number of shares in issue. The Board’s decision to maximise the dividend was informed by the intention not to compromise shareholders whose holdings had been diluted by the new shares issued as consideration for the acquisition of the Cooke operations, and which had only contributed to operating and financial results for seven months.

With regard to organic project opportunities, management focuses primarily on opportunities that will extend life-of-mine (LoM) plans in order to sustain the dividend and meet specific investment hurdle rates. To ensure delivery on this aspect of the business and to avoid distracting core production personnel at the operations, a dedicated project team was appointed in 2014 to evaluate, rank and progress organic projects. In addition, a business development function was created to assess external growth opportunities, which may meet the required minimum investment criteria.

Organic projects and external growth opportunities are evaluated using several criteria with strategic, technical and financial parameters, including investment hurdle rates that vary between 15% and 30% (real rates in South African Rands) depending on the level of project confidence.

The following key criteria have guided corporate decisions on project funding to ensure that dividends are not compromised:

  • Projects will be funded primarily from cash flow after dividends. Alternative funding options may be considered where appropriate.
  • Strict filters are applied to organic projects, including assessing each project for risk, returns and the impact of financing on returns.
  • Acquisitions must be earnings-accretive with medium-term potential to support the core dividend strategy.
  • We will pursue value opportunities in other similar mining sectors as long as these opportunities are consistent with our underlying benchmark dividend strategy.

Consistent with the strategy to extend the operating life of the business to ensure the sustainability of the dividend, the acquisitions of Cooke, Wits Gold and Sibanye Gold Eastern Operations Proprietary Limited (SGEO), previously Southgold Exploration Proprietary Limited, the sole owner of the Burnstone gold mine (Burnstone) was exercised.

Capital expenditure in 2015 is planned to increase by 10% to R3.6 billion, largely due to an increase in expenditure on projects to extend the operating lives of the mines and on projects such as Burnstone.


Gold production for the year ended 31 December 2014 was in line with guidance at 49,432kg (1.59Moz). This is despite a loss of over 500kg due to an underground fire at Driefontein early in the year and loading shedding by Eskom in the latter half of the December quarter.

The Kloof, Driefontein and Beatrix operations produced 45,127kg (1.45Moz) of gold for the year, which was just over 1% higher than in 2013. Cooke contributed 4,305kg (138,400oz) during the seven months of incorporation into Sibanye with the build-up progressing more slowly than anticipated. This underperformance occurred primarily at Cooke 4 shaft, and led to a Section 189 restructuring process, which has been completed successfully.

Uranium production from Cooke continued uninterrupted from May 2014, resulting in a stockpile of approximately 180,000lb at year-end. Uranium production costs averaged approximately US$24/lb.

Gold production guidance for the year ending 31 December 2015 is forecast to be between 50,000kg and 52,000kg (1.61Moz and 1.67Moz). Approximately 250,000lb of byproduct uranium production is forecast.


Total cash cost for the year of R295,246/kg (US$849/oz) was in line with guidance and with annual increases maintained below historical mining inflation rates. All-in cost range of R375,854/kg (US$1,080/oz). The forecast assumed an average exchange rate of R10.60/US$ while the actual average exchange rate for 2014 was R10.82/US$.

Capital expenditure of R3.3 billion was marginally lower than the guidance of R3.4 billion, mainly due to the deferral of non-core projects to manage cash flows, mostly offset by unbudgeted project expenditure at Burnstone and in ore reserve development (ORD).

For the year ending 31 December 2015, total cash cost is forecast at between R305,000/kg (US$850/oz) and R315,000/kg (US$875/oz). All-in sustaining cost is forecast at between R380,000/kg (US1,055oz) and R395,000/kg (US$1,100/oz), with All-in cost forecast at between R385,000/kg (US$1,070/oz) and R400,000/kg (US$1,110/oz). Dollar estimates for 2015 are based on an average annual exchange rate of R11.20/US$.