Sibanye Gold has big expansion plans that rest on it being a more efficient and profitable company in the future, in order to overcome the weak gold price, a company source has said.
The announcement on Wednesday that Sibanye planned to cut 1 100 positions relating to its Beatrix West operations came as no surprise, first, because Sibanye Gold has been struggling to get its Beatrix West mine operating after a fire in February and, second, because Gold Fields – from which Sibanye unbundled in February — has announced yet more head-office job cuts of skilled and semi-skilled workers on the back of a weak gold price.
Gold Fields has paid out R466-million in voluntary severance costs since 2010. What was encouraging about the negotiations over Beatrix mine, said Sibanye Gold chief executive Neal Froneman, was that the process was conducted in a mature manner, with management and labour reaching agreement to try to keep as many jobs as it could at the mine.
Eventual closure of the mine was not ruled out, however. Sibanye, the second biggest gold producer in South Africa, announced that it planned to cut 330 staff at the Beatrix mine, with the reduction of an additional 780 positions at its ageing Beatrix West operations following an agreement reached with labour unions.
This was fewer than the 3 000 jobs originally expected to be lost after it was estimated that the mine would not be up and running until June 2014 because of the fire damage.
The mine was estimated to be losing about R28-million of production a month. Peter Major, mining consultant at Cadiz Corporate Solutions, said the loss of Beatrix was sad news as it was "an old asset that had performed better than anyone expected" and would have as much life in it, with good management and capital expenditure, as the Kloof Driefontein Complex (KDC), also owned by Sibanye.
Merger of the administrative staff
Though not confirmed by Sibanye, it is expected that there will be a merging of the administrative staff of Beatrix and KDC to increase efficiency, in much the same way as Gold Fields has cut down its head office.
James Wellsted, a spokesperson for Westonaria-based Sibanye, yesterday did not rule out more retrenchments should the Beatrix West section fail to become profitable. But he said production had in fact improved in sections that were presently being mined.
A source close to the mining company said that Sibanye was interested in new and exciting acquistions in the gold sector. In January, Froneman indicated that it might look to eastern markets for funding, finding North American and European investors a bit more wary.
When Sibanye listed on the JSE it warned that it foresaw substantial risks in the gold sector, in particular the new tax proposals being discussed and labour instability.
It also revised down its underground reserve estimates to 12.9-million ounces, 28% lower than Gold Field's estimate at the end of 2011 because of concern that high costs and lower gold prices would make some areas unprofitable to mine.