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Defence Force needed to quell ‘huge’ illegal mining threat – Sibanye Gold

Sibanye Gold CEO Neal Froneman tells Mining Weekly Online’s Martin Creamer that the government needs to bring in the South African National Defence Force to put an end to illegal mining. Video and Editing: Darlene Creamer.

20th February 2014

By: Martin Creamer

Creamer Media Editor

  

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JOHANNESBURG (miningweekly.com) – Illegal gold mining had reached such a scale that it would not be inappropriate to bring in the South African National Defence Force (SANDF) to quell the scourge, which was not only plaguing abandoned mines but also Sibanye's operating mines, Sibanye Gold CEO Neal Froneman said on Thursday.

Responding to Mining Weekly Online after presenting a superb set of results that defied the lower gold price and delivered a high-yield dividend, Froneman said the widespread notion that illegal mining was only taking place in illegal mines was completely false. (See also attached video)

“It’s literally war,” said the highly regarded head of the JSE- and NYSE-listed Sibanye.

“It’s at a level where I don’t think it would be inappropriate to bring in the SANDF. It’s way out of control,” he said, recounting incidents of 150-plus illegal miners attacking plants.

Sibanye was having to spend R300-million on security, made up of former high-ranking Hawks.

The South African Police Services was unable to help because of their lack capacity to go underground.

It was not only the unemployed that were mining illegally but also Sibanye's own employees, who were developing the practice of sneaking back into the mine during their leave and mining for their own account.

The company had a “very significant” illegal mining problem at its Kloof Four shaft on the West Rand, where blasting wires were cut and ore boxes dropped, which created major disruption.

Froneman said large criminal syndicates were driving the illegal practice.

"Illegal mining is a huge issue and I don’t think that the general public is aware of how big this issue is," he said.

Questioned by JP Morgan gold analyst Allan Cooke on the extent of the company’s Mining Charter compliance ahead of the April 30 deadline and on ‘once-empowered, not-always-empowered’ issues, Froneman said that any government accusation of minimal compliance would be completely incorrect and it was time that government acknowledged the considerable transformation that had actually taken place.

“I do expect we’re going to have a real head-butting session as the industry,” Froneman commented, condemning the 'once empowered, not-always-empowered' situation as unacceptable.

If the government chose to bully the industry into fresh empowerment transactions, the industry would meet it in the Constitutional Court.

Sibanye had been awarded new-order mining rights based on empowerment that was in place at the time and it was impossible to understand how that empowerment could "suddenly just disappear”, Froneman added.

Sibanye reported 19% higher operating profit to R4-billion, from R3.4-billion in the six months ended June 2013, and the board approved a maiden final dividend of 75c a share for the six months, resulting in a total dividend of 112c a share for 2013 – the equivalent of a dividend yield of 9.1% at the closing share price on December 31.   

Gold production was 18% higher at 773 600 oz, or 24 061 kg, restoring the quarterly production rate to 2010 levels.

The all-in cost was reduced by 10% from the previous six months to $1 043/oz (R336 848/kg) and the all-in cost margin was up 20% from 17% in the previous six months.

The fatal injury frequency rate of 0.10 per million person hours worked is an all-time low.

Net debt fell to R499-million from R1.9-billion at June 30 and zero debt is being targeted.

Some R2-billion in debt repayments reduced gross debt to R2-billion and bridging loan finance was moved to more favourable and less restrictive terms.

Gold reserves increased 46% to 19.7-million ounces, with a maiden uranium reserve of 43.2-million pounds declared.

Froneman emphasised that Sibanye would "remain true" to its dividend yield policy, even if it had to borrow money to do so.

A decision was taken to impair Beatrix West’s mining assets by R821-million as a result of underground fire in February, which affected 38% of the planned production area.

Rewards were also being offered for information on the fire at Driefontein gold mine in December, which coincided with canvassing at the operation by the Association of Mineworkers and Construction Union.

Edited by Creamer Media Reporter

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