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Sibanye scraps dividend to preserve cash after swinging to loss in FY'17

Sibanye Gold Ltd. on Feb. 22 scrapped the final dividend for 2017 as it looks to preserve cash after swinging to a loss in 2017.

Instead, the precious metals producer announced a scrip issue of four new shares for every 100 shares held in the company. The group had already scrapped the interim dividend. Sibanye paid an interim dividend of 85 cents and a final dividend of 60 cents for 2016.

The company's cash and cash equivalents decreased to 2.06 billion South African rand as of Dec. 31, 2017, compared to 6.52 billion rand at the end of June 2017.

For the final six months of 2017, the company's attributed profit was 366.3 million rand, down from a year-ago profit of 3.14 billion rand. In line with its forecast, Sibanye's full-year loss came in at 4.44 billion rand, compared to a 2016 profit of 3.47 billion rand.

The precious metals producer attributed the result mainly to heavy losses booked in the first half of 2017 due to impairments, a 1.08 billion rand healthcare provision for the settlement of silicosis class-action litigation as well as transaction and restructuring costs.

The weaker financial results were also driven by differences in commodity prices and the stronger rand against the U.S. dollar.

Due to the integration of Rustenburg operations in South Africa and U.S.-based platinum group operations of Stillwater Mining Co., group revenue for the six-month period jumped 61% year over year to 26.69 billion rand.

"This is a remarkable result from assets which, before being part of the Sibanye-Stillwater Group, had been delivering significant and sustained losses for many years," CEO Neal Froneman said.

Group adjusted EBITDA in the second half increased 20% to 5.96 billion rand. This includes 1.6 billion rand from the South African platinum group metals operations and 2.1 billion rand from the U.S. PGM operations.

"The Rustenburg operations have consistently delivered solid production and improved financial results, with approximately 1 billion rand in cost savings and synergies realized in the first year of incorporation, well ahead of initial expectations of 800 million rand over three to four years," the company said.

Primarily due to the increase in borrowings arising from the acquisition of Stillwater, net finance expenses for the six-month period increased by 963 million rand on a yearly basis to 1.31 billion rand.

Sibanye's net debt increased to 23.18 billion rand, or US$1.88 billion at year-end, compared to net debt of 6.29 billion rand, or US$459.7 million at the end of 2016.

On the operational side, Sibanye's gold and platinum group metals output for the second half was in line with guidance, while full-year output exceeded guidance.

"Both the South African gold and PGM operations delivered annual production above guidance and costs below the guided range. The cessation of mining at the loss-making Cooke operations, which was a primary reason for the year-on-year decline in gold production, is expected to reduce the all-in sustaining cost for the gold operations in 2018 by about 15,000 [rand per kilogram, compared to 2017]," Sibanye said.

In 2018, the company expects gold production of between 38,500 and 40,000 kilograms, with all-in sustaining costs between 475,000 rand per kilogram and 495,000 rand per kilogram.

4E Platinum group metals production from South African operations is forecast at between 1.1 million and 1.2 million ounces at all-in sustaining costs of between 10,750 rand/oz and 11,250 rand/oz.

At the company's U.S. operations, 2E PGM production is expected to range between 580,000 and 610,000 ounces at all-in sustaining costs between US$650/oz and US$690/oz.