Sibanye Gold’s (SBGL) gold production in 1Q16 was 360,800 ounces, which is 14% higher compared to the same quarter last year. However, 1Q15 was impacted by a number of one-off events such as an underground fire, a conveyor belt failure, union conflicts, and plant accidents.
Sibanye’s 1Q16 production declined by 12% quarter-over-quarter. The sequential lower production was mainly due to the Christmas and early Easter breaks.
The company achieved a record rand gold price of 600,267 rands per kilogram (or kg), up by 19% year-over-year (or YoY). Higher gold prices offset Sibanye’s sequentially lower production such that its operating profit increased by 240% YoY to 2.5 billion rand. The company’s operating margin for the quarter was 38%.
Gold production outlook maintained
Sibanye (SBGL) maintained its gold production outlook for 2016 at 1.6 million ounces. It also maintained its cost guidance at $735 per ounce for total cash cost, $880 per ounce for all-in sustaining costs, and $915 per ounce for all-in costs.
Downside to cost guidance?
The cost guidance is based on an exchange rate assumption of 15 rand to $1.00. While the average exchange rate for 1Q16 was ~15.8 rand to $1.00 as of April 25, 2016, the spot exchange rate was close to 14.5 rand to $1.00.
Also, Sibanye has increased the basic pay for some of its workers to avert a strike by the AMCU (Association of Mineworkers and Construction Union). This input cost increase might put the company’s cost guidance under pressure if the rand does not depreciate further.