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Edited Transcript of SGL.J earnings conference call or presentation 23-Aug-18 8:00am GMT

Q2 2018 Sibanye Gold Ltd Earnings Call

Sandton Aug 30, 2018 (Thomson StreetEvents) -- Edited Transcript of Sibanye Gold Ltd earnings conference call or presentation Thursday, August 23, 2018 at 8:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Charl A. Keyter

Sibanye Gold Limited - CFO & Executive Director

* Christopher M. Bateman

Sibanye Gold Limited - EVP & Head of US Region

* James R. Wellsted

Sibanye Gold Limited - Senior VP & Head of IR

* Neal John Froneman

Sibanye Gold Limited - CEO & Executive Director

* Richard A. Stewart

Sibanye Gold Limited - Executive VP & Head of Business Development

* Robert van Niekerk

Sibanye Gold Limited - EVP & Head of SA Region

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Conference Call Participants

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* Adrian Spencer Hammond

SBG Securities (Proprietary) Limited, Research Division - Research Analyst

* Johann Steyn

Citigroup Inc, Research Division - MD and Head of South African Equity Research

* Nkateko Mathonsi

Investec Bank Limited (SA), Research Division - Research Analyst

* René Hochreiter

* Yatish Chowthee

Macquarie Research - Gold Analyst

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Presentation

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [1]

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All right. Good morning. I am very pleased to say we are starting on time. Welcome to everybody. We have a long presentation and it would be a miss not to have some of the sections that we have got upfront based on our recent safety events. Starting off with safety, I would like to just ask Dr. [Kubes Dioge] to come up and share a safety moment and just discuss the safety procedures here at JSE. Thank you, Kubes.

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Unidentified Company Representative, [2]

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Good morning everybody. Just so when you hear the alarm, which I'm sure will be clearly audible, there's 2 exits there, 1 there and 1 over there. Then you orderly proceed to the front door. But remember it's a revolving door, so if you're in a hurry just check there is nobody behind you, otherwise we're going to have some flying arrangements here. And get to the fountain and then cross to the right to Gwen Lane, and that's where we will then assemble in case of an emergency. So as said, 1 there, 1 over there and (inaudible). For safety moment I just think that -- I observed a person yesterday, not from our country, travelling in his car and be very relaxed with his phone at the robot and so forth and his back in the back of his seat and so forth and I advised him, "Listen, be very careful." So I hope that message has gone a long way. Thank you very much.

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [3]

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Thanks, Kubes. All right. Today is about the results of the first half of 2018. Right at front a disclaimer and a safe harbor statement. What I propose to cover today is, first of all I know you want to know about the results. We have made a release this morning but we'll just have a very quick salient operating results. There's 2 slides there.

I do want to spend a bit of time on safe production, our first priority. In future I am going to do more of this. I do think it's important to focus in and do a little bit of a deep dive into certain areas of our company. And in this case I am going to be talking about employees and communities. And then we'll get into the details of the operating and financial review, Rob van Niekerk will do the South African region operating results, Chris Bateman is here with us today from the U.S. he will do the U.S. operating results. And then Charl will do the financial results.

I do think a lot of our recent delivery is based on what I consider a good strategic plan. And I would like to look at strategic delivery and then there is a brief conclusion and then we will enter into Q&A.

So just some of the salient operating results. Very pleased to say that adjusted EBITDA has increased by 26% to just under ZAR 4 billion. Also very pleasing that our South African PGM operations have shown continual operational improvement with all-in sustaining cost, another 2% lower at just over ZAR 10,000 per 4E ounce. And probably more importantly, adjusted EBITDA increasing by 115% to just over ZAR 1 billion.

Another solid performance from the U.S. PGM operations with all-in sustaining costs of $653 per 2E ounce. And very importantly, Blitz remain ahead of schedule and we remain very positive about Blitz and what we're seeing. On a like-for-like basis, the South African gold operations declined by 7% to just over 18 tonnes of gold with all-in sustaining cost 7% higher mainly as a result of lower volumes, specifically at Driefontein. We will cover that in more detail, but I again based on the very significant safety disruptions that we had at Beatrix, Kloof and Driefontein, in my view that is a commendable achievement. We've had good operational recovery at Beatrix and Kloof. And Driefontein is still affected by the seismic damage that occurred at Masakhane shaft. We expect Driefontein to be back up and running as normal probably by the first quarter of next year.

Importantly as well, our deleveraging has been accelerated with what we believe is a very smart $500 million stream. And that resulted in net debt to adjusted EBITDA reducing to approximately 1.85x. We concluded the DRDGOLD transaction. We now own 38% of DRDGOLD. We will talk a little bit about that. We announced a strategic relationship with Regulus to unlock value from Altar a copper-gold project that we inherited with the Stillwater acquisition. And the Lonmin acquisition remains on check with some of the approvals already received from SARB and the competitions authority in the U.K. And we will talk a little bit about -- more about the timeline regarding Lonmin.

So let's first just talk about safety, and I want to say upfront, in many of our discussions with stakeholders, with investors, there is a perception that there is just one thing you can do like a silver bullet that will change safety performance. Safety is a much more complex issue than just 1 issue like a project that has a critical path. And therefore it's important that we try and explain the interrelationships between systems, people and so on. And of course it all starts with the culture and the values in an organization. So again, our purpose at Sibanye is our mining improves lives and I am going to show you some of that.

Our vision is about superior value creation for all stakeholders, not just shareholders, and that's through the responsible mining and beneficiation of our mineral resources, and that's underpinned by our C.A.R.E.S values which is commitment, accountability, respect, enabling and safe production.

Now if you look at our first half 2000 (sic) [2018] safety performance. There is a couple of points I want to make. There has been a lot of disinformation in the media and I think some things need to be corrected. Nothing comes before safe production. I don't think there is any company in the world that operates by putting profits or production ahead of safety. We have never and we will never prioritize profit before our people.

The recent spate of fatalities is not consistent with our historic performance and I am going to show you that again, I have shown it before. More than half of the fatalities were due to 2 major incidents. Investigations are ongoing. We do not have any outcomes yet from the DMR. I think it's also safe to say we have no surprises as we have explained the accidents. That's exactly what we have found.

Importantly, Beatrix operations have achieved 2.5 million fatality-free shifts. And they have been fatality-free since May 2017. That's an incredible achievement. So if you sit there thinking that the entire organization has a serious safety culture issue, well I think Beatrix suggest that it doesn't. I have put up the fatal injury frequency rate, but I have also put up the lost time injury frequency rate to show you that the fatality seem to be abnormal compared to the underlying lost time injury frequency rate.

As I said, I would show you where we have been, where we are compared to our gold peers in the deep level gold mining industry. Well certainly on fatalities we don't rank well. But if you look at the graph, we have been one of the better performers from a fatal injury frequency rate point of view. If you look at the serious injury frequency rates and the lost time injury frequency rates, you can see that we are outperforming some of our peers. So it's very disappointing to us that we've had these fatalities.

In the PGM sector, I am pleased to say that our PGM operations have done much better. In fact the entire platinum industry is actually doing very well. They have demonstrated very good improvements year-on-year. And again, in the serious injury frequency rate and lost term injury frequency rate we still -- we still are leading the sector. And again, I think that just underpins what I've said, that we're not inherently an unsafe company.

Needless to say, that doesn't mean that we are not intensifying our focus on safety. And it starts with our values. All our decisions we make in our company are based on our values which I've already explained. And through that, through engaged leadership we have been able to define our safety interventions into essentially 3 buckets. One is fit-for-purpose systems. That's safety systems and so on. And enabled environments and then empowered people. And I would just like at a high level just to explain what that mean.

So an enabled operational environment means your equipment, your layout, your environmental conditions are conducive to safe productive rock breaking, that's where it starts. And if you get that wrong you're already on your back foot. In addition to that, through our DigiMine investments we are investing in future-safe technology, and we've made significant contributions to Wits University to progress safe technology.

An empowered and competent workforce, we are driving our values and culture, making sure that they are instilled right from the top of the organization to the bottom. We're reviewing our training procedures, making them more interactive. And more importantly right now in short term making sure that employees know their right to withdraw. We rely on that so that accidents don't happen. The flip side of that is making sure that supervisors actually support and are constructive in allowing an employee to withdraw and not intimidating employees in this case.

So that received a lot of attention. We've had intensive safety days at each shaft. We have ongoing interventions in the [crush] where people go to work, managers are meeting with them. We've actually reinforced with shift bosses what the statutory duties are and focus them on safety. And then of course there is the world-class safe production systems. And those are your ISO systems and your safety systems. We believe we have base practice systems. Clearly there is always room for improvement. And we will be certifying our safety systems in due course.

We support the Mineral Council initiatives. We're part of the Mineral Council. We ascribe to the ICMM principles. And we are in the process of putting a global safe production advisory board together.

In terms of the Mine Health and Safety Council, they have a cultural transformation framework which we also ascribe to. And it includes the rest of the things that we have spoken to previously such as making sure that our bonus and performance incentives drive the right behavior, they don't drive unsafe behavior. And that is to prioritize safety and safe production.

The risk management pillar. We brought in a leading academic to review our risk management systems and enhance them if possible. The leadership pillar, I've explained in some details through value-based decision-making. Leading practice pillar is industry initiatives of 0 harm task team at the mine health -- sorry at the Minerals Council. It's something that we support and part of, where the 0 harm task team sits and looks at accidents and companies adopt the best practice and leading practices.

Diversity management pillar is clearly important in addressing attitudes and behavior. And then of course data management in terms of safety system. So everything we've put out in the last few months around safety would find its way into one of these boxes. So it's not a shotgun approach. There is -- there is structure and logic to exactly what we say.

Very importantly, at our end-of-year results in February we said that for the industry to break through the barrier of where we are in fatalities at the moment cannot be done by the management of the companies alone. It requires collaborations of all stakeholders. And that was before we had these devastating safety incidents.

I'm very pleased to say that despite having those we've been -- we've managed to have 2 safety summits with the leadership of the predominant unions in the mining sector together with the DMR and of course senior management of Sibanye-Stillwater. And there has been a safety pledge signed. We have put that out, I'm not going to read it in detail, it is up on the screen in the green block.

And again, together with all the stakeholders we are driving the same set of initiatives that I've shown you that fit into a very structured approach. So it's ensuring continuous safety of workplaces, compliance, the right of employees to withdraw from unsafe workplaces and you can imagine that unions or organized labor have a big impact on convincing employees that they have that right and they must exercise their right. And of course, if there is any intimidation we've opened up anonymous reporting structures so that we can deal with that intimidation if it exist.

Leadership effectives, values and culture transformation, exactly what I've been saying. Review of safety structures, it occurs to us that the safety rep as contemplated in the law maybe doesn't work as well as it was envisaged, and we need to address it as an industry to make sure that those safety structures work.

Training and development is ongoing. Accelerating research and development. I've mentioned DigiMine. Review of incentive schemes and making sure that incentive schemes don't drive production at the expense of safe behavior. And then, trust building and effective engagement and communication.

Many of these things are not new. But certainly in a crisis like we've been in, they need to be reinforced, they need to be reenergized and of course you can't just rely on these things, you've got to do things that are going to change in the long term, like changing attitude and behavior.

All right. As I said, I think I need to explain our tree, and I've done this before, but essentially we have a tree that we use to explain what we mean by superior value for all stakeholders in terms of our vision. And the roots of the tree are our values. The trunk of the tree is our people. They give it strength and direction. And then of course, there is no tree unless you have safe, cost, volume and grade. In other words safe production.

If you don't have safe production the rest of the tree doesn't grow. So assuming you have safe production the tree develops a canapé and in that canapé are your stakeholders, those related to the environment, shareholders, communities, employees, the company itself and the mining industry.

And if you get it all right, that tree bears fruit and the fruit is from an environmental perspective clean water, air and land, shareholders' total returns, community upliftment, employees' better lives, the company becoming more sustainable, creating value and of course for the mining industry and especially in South Africa contributing extensively to the economy.

And as I said at the beginning, I intend at every results presentation to take 1 or 2 of these and show you how we are caring about that specific stakeholder. And in this case I want to do employees and communities and just share with you what we have done.

So first of all, we employee 66,000 people. With Lonmin that's going to go up to almost 90,000 people initially, probably even higher. And when you include the multiplier effect, that means we are responsible for 2% of South Africa's population. That is a very significant commitment and a very significant responsibility.

In terms of some of our initiatives, again these are not new, they've been ongoing, but our Care for iMali program which is really about indebtedness which we know was significant cause of Marikana. We have put over 60,000 employees through that training program. And that includes community members. We have reduced garnishee orders which were illegal or overcharged by ZAR 1.4 million.

In terms of affordable home ownership to employees, we've transferred 538,000 houses and we've bought 36 more. Our biggest constraint here is getting financing for our employees and we really need financial institutions to come onboard. We have the ability to deliver houses, they need to assist us in terms of the ownership.

In terms of employee training and development, in the South African region we have spent over ZAR 532 million. In the U.S. region $1.3 million. These are on Beatrix and other initiatives.

In terms of healthcare, we have changed our healthcare model back in 2013-2014. We have introduced what we call proactive healthcare through our primary healthcare clinics. This has resulted in early detection of TB. Any person that comes into that clinic gets assessed for TB. And instead of addressing TB when it's well advanced and many other people have been infected, we pick it up very early. And we are also very pleased to report that people or employees on HIV treatment, we've got a very high retainment, approaching 99%. So that leads to healthy employees under the circumstances and of course more productive employees.

In terms of value to communities, and I've got a couple of pictures there which you can refer to, but I really want to go to the numbers. If you look at what we've done in terms of small-scale farming, we've spent ZAR 9.2 million on a livestock development project. In terms of education projects, ZAR 18.7 million. Employee savings, I've already covered this. This is our Care for iMali program. Significant savings in terms of garnishee orders, 60,000 employees and community members trained.

And to put the garnishee number in perspective though, that's a 73% reduction, that ZAR 1.34 million. Over ZAR 50 million has been spent on health and infrastructure development, poverty alleviation projects in Gauteng. We've contributed ZAR 49 million to the University of Johannesburg and the University of Witwatersrand. And we'll continue to do that.

ZAR 12 million is being spent on early childhood development and brick manufacturing in the northwest. So those are very significant contributions and they will clearly be ongoing. So a very good example of how we care and what we're doing.

At this point I'm going to ask Rob to come up and present the South African region. After that of Chris, if you can do U.S., and Charl if you can then carry on with the financial results. Thank you.

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Robert van Niekerk, Sibanye Gold Limited - EVP & Head of SA Region [4]

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Thanks, Neal. Morning, everybody. I'll start off with the platinum operations and then -- or the PGM operations, and then I'll flick over to gold.

I'm pleased to be able to report that the turnaround we saw in the PGM operations in 2017 has carried through to 2018. The 4E basket price was 8% higher year-on-year. The PGM production is slightly lower year-on-year, 6 months compared to the first 6 months of last year, but it is at that upper end of our guidance, which is 1,1 to 1,15 million ounces per year.

The Mimosa contribution year-on-year is steady. And these PGM assets are highly leveraged to the price of metal. And we can see that by the increase in the adjusted EBITDA of 115% to ZAR 1 billion for the period under review.

On the bottom left-hand side we can see what the SA PGM production looks like. We do see a decrease of approximately 10,000 ounces there, like period and like period. And this is essentially ascribed to the conventional operations in the Rustenburg section and this decrease was expected. On the right-hand side we can see a similar sort of decrease of 10,000 ounces on the surface operations, and again this is due to a change in treatment strategy, and it was as planned for 2018.

Looking at the all-in sustaining costs. The all-in sustaining costs are 2% lower year-on-year, ZAR 10,106 per 4E ounce before. And here now we can see the benefit of the planned synergies reflecting in the costs. This is despite a lower production and above-inflation wage and electricity cost. Increased by-product credits have also positively affected the all-in sustaining costs. We've had an improvement in our plant recovery, in our chrome section has increased from 10.5% to 12%. This has resulted in a 6% increase in chrome volumes sold. Chrome credits are ZAR 480 million in this year compared to ZAR 200 million or ZAR 196 million last year for the same period. And other product metal credits are ZAR 560 million in the first half of this year compared to ZAR 395 million in the first half of last year.

On the bottom of the slide we can see what the all-in sustaining cost variance looks like. In 2017 it was ZAR 10,364 per 4E ounce and now in 2018 we can see it's ZAR 10,106 per 4E ounce. And we can see the significant effect of all of the contributors. There has been a reduction in working costs. There has been a reduction in CapEx for the same period compared to last year. And you can see what effect the slightly reduced volumes have had.

Having a look at the gold operations, I must say that that has been a tough start to the year. Quarter 2 has been particularly challenging on the back of lot of safety-related stoppages. And production has declined 13% year-on-year to 18,616 kilograms. About 50% of this reduction we can ascribe to the closure of the Cooke underground operations in 2017. And a large percentage of this is also due to the seismic damage we have sustained at Driefontein mine shaft or the Masakhane shaft and now on the Driefontein operations. I am pleased to be able to report that production at Driefontein and Beatrix is consistent year-on-year.

With respect to the damage we have sustained at Masakhane, we have a rehabilitation program in place. That rehabilitation program is on track. I'm quite certain we will have that section fully rehabilitated by the end of the year. It will take us probably 2 months to ramp up to normal production. So by the end of quarter 1 2019 thing should return to normal.

The adjusted EBITDA contribution was ZAR 1 billion for the period. On the bottom left-hand side of the slide we can see the gold production and the very significant contribution to the shortfall from Driefontein and the effect of Cooke. And on the right-hand side we can see a similar growth for the surface operations with almost the entire shortfall being ascribed to the depletion of surface or (inaudible) material at the Driefontein section.

Having a look at the all-in sustaining costs. Our all-in sustaining costs on the gold operations increased by 7% to a little bit more than ZAR 520,000 a kilo. As I've said already, we alluded to already, this is primarily due to the lower volumes at the Driefontein operations and has been partially offset though by the closure of the Cooke underground operations.

On the bottom of the slide we can see the all-in sustaining cost variants and you can see the negative of the very significant role that was played by the volume reduction which is the second bar from the right-hand side.

As I mentioned already, we are busy rehabilitating the Masakhane shaft. I really expect that to return to normal production by the end of February or so in 2019. And at that stage I predict the operations to stabilize or to return to normal. Thank you.

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Christopher M. Bateman, Sibanye Gold Limited - EVP & Head of US Region [5]

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I'm just going to cover the U.S. operations here. I'm pleased to report that 2E PGM production was 294,000 ounces in half 2. We are comparing half 2 to -- sorry, half 1 to half 2 '17 as opposed to Rob which was half 1 on half 1 given the acquisition in May. But production was up 4% and in line with our guidance. Blitz contributed 20,200 ounces in half 1 and the ramp up is ahead of schedule, both in terms of production as well as the infrastructure that we are putting in.

And the U.S. region contributed USD 153 million or 48% of group -- adjusted EBITDA. That was on good price performance. We had a price of $996 per 2E ounce compared to $947 last year. Solid cost performance. And that increase in production, 4% increase in production.

From an AISC prospective, we had an AISC of $653 per 2E ounce in the first half of this year in line with guidance and down from $660 in the last half of last year. Included in that AISC is $44.7 million of sustaining and development -- or capitalized development, so sustaining CapEx. That's about $153 an ounce which is in that $653. Comparatively last year that was about broadly equal to $145 million again of sustaining capital which was $158 per ounce. On a total capital basis, we were in line again this year with spending in the second half of last year at $54 million.

Finally I'd just like to touch on the recycling business, it continues to perform well. We had an adjusted EBITDA of $10 million from the recycling sector. We've got 3 production there which includes rhodium with the palladium and platinum. While the volumes were broadly similar, 23.8 tonnes a day fed this time against 23.9 in the last half of last year. The grade of the material received was slightly lower, different mix of catalysts that came in. So we fed 360,000 ounces compared to 391,000 ounces last year. That was a record half for us. And the performance in the first half of this year other than the back end of last year is as good as we've had. So recycling continues to perform well. We're seeing good volumes in that business.

With that I will handover to Charl to cover the group financial results.

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Charl A. Keyter, Sibanye Gold Limited - CFO & Executive Director [6]

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Thanks, Chris. Good morning, ladies and gentlemen. As alluded to earlier, obviously this was a very challenging half year. But I think in the end we were pleased with the financial results considering all the issues we had to deal with.

I'd like to start off with revenue. Revenue for the period increased by 24%, the SA PGM revenue increased by 13%. U.S. PGM increased 4-fold in terms of dollar contribution. And that was due to the inclusion of the Stillwater operations for full 6 months versus just 2 months in the previous half year. However, the SA gold contribution to revenue decreased by 14%. We've highlighted the contribution that chrome and by-products make to the overall revenue. So this is a number that's often overlooked. And you can see that it's a significant contribution in terms of revenue. Rob has taken us through those numbers but just to refresh everybody, Chrome sales was ZAR 480 million compared to ZAR 200 million in the previous -- in the similar period of 2017. And then other by-products sales is ZAR 560 million compared to ZAR 400 million, so basically a significant contribution. Cost of sales before amortization and depreciation increased by just under ZAR 3.7 billion. And if you look (inaudible) number it was $333 million again compared to 6 months in this half to 2 months in the similar period 2017. And that on a rand basis was about ZAR 4 billion. All-in sustaining cost and the gold unit cost increased by 7%. This was mainly due to the lower volume. SA PGM decreased by 2.5% and ZAR 10,106 per 4E ounce. And then the US PGM increased for the similar period by 5%. Adjusted EBITDA came in at ZAR 3.9 billion compared to just over -- just under ZAR 3.1 billion in half 1 2017. If you look at amortization and depreciation, that was mainly due to the U.S. PGM inclusion for the full period, and their contribution was ZAR 700 million or $60 million, that is the net difference.

If you look at the finance expenses, you see that the interest decreased in half 1 2018, and that was due to the successful refinancing of the Stillwater bridge facility.

A number that's really standing out in our results is the gain of financial instruments. And that was basically the revaluation of our convertible bonds. It is trading well below par (inaudible) you realized, the gain in income statement was ZAR 810 million.

Care and maintenance cost at the Cooke operations and at Marikana was ZAR 278 million (sic) [ZAR 273 million], that is a increase. Remember that Cooke was in operation in half 1 2017. The other number I would like to point is mining and income tax. And you will see that the effective tax rate in this half is substantially higher than in half 1 2017 and this is mainly as a result of the deferred tax of the Cooke assets not being recognized in this half.

I think the other important slide I would like to discuss is out debt maturity profile. And you heard Neal say that we've managed to get the streaming transaction away. That is the pretty competitive in terms of overall financing rights and it compares favorably to some of our lower cost U.S. dollar debt that we've got currently [inside].

(inaudible) mainly goes towards reducing long-term debt. At this point (inaudible) towards long-term debt and about 20% towards short-term debt as we're still refining those numbers.

And the pro forma reduction of net debt to adjusted EBITDA you can see for the half year it came in at 2.55. If we included the streaming net number it will come in at approximately 1.85x. Just to remind everybody, covenants is still 3.5x toward the end of 2018 and thereafter it steps down to 2.5. You can see that we are at that point still comfortable within our covenants.

The other point we'd like to just point out is liquidity, we don't have a liquidity issues. Currently we have $649 million of net cash and undrawn facilities on hand. And then obviously the 500 million stream, well, that all goes towards servicing the longer term elements of our debt.

And then lastly into 2019 our rand RCF is up for refinancing, and we'll start with that process early in 2019 to make sure that it's concluded well ahead of time.

And at that -- at this point I would like to hand back to Neal to take us through the rest of the presentation. Thank you.

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [7]

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Thanks, James. This is a slide that we've used previously. And it's always important to first of all refresh everyone's memory and then to actually see how we've (inaudible) just to highlight to the audience our 3-year strategic focus is with, first of all, deleveraging our balance sheet and we've said quite a bit about that already. Maintaining our focus on operational excellence, improving our position on global industry cost curves, we will look at that. Addressing our South African discounts. Consistent delivery on our market commitments. And once we've got all that all that right pursuing value-accretive growth based on strengthening equity rating. So that's somewhere in the future (inaudible).

In terms of delivering on our strategy, let's take them one by one, and 5 is a good rating 1 is poor rating. So deleveraging our balance sheet, we see it close to -- to rate that as a 4. We've accelerated our deleveraging as we said through the stream. We have reduced our financial risk and we are looking at some further deleveraging options. But the bulk of that is being done. The rest of the deleveraging will come through operational delivery and just reducing our debts.

Maintaining our focus on operational excellence. Well, I suggest that our PGM operations both here in South Africa and the U.S. has done it. Clearly one of our gold mines being Driefontein is not doing well, it's being severely affected by safety and then we need to address that. So we've given it a 3.

Improving our position on global industry cost curves. Again the South African PGM operations has done that. I'm going to put up an industry cost curve shortly. Our gold unit costs have been impacted by mainly an under-delivery of volume and we are quite confident that that will change as we rehabilitate the seismic damage at Driefontein and stop having safety incidents. And consistent delivery on our market commitments, I think we've done that. So while we haven't delivered on our gold guidance we had to adjust that in July. That's certainly in our PGM business. Our guidance and other delivery is clear.

Addressing our South African discounts. We continue to work with the Minerals Council in trying to influence government to introduce competitive charters. Obviously there was some good news yesterday. A final realization that the proposed maintenance (inaudible) are going to be stopped, that's great news because I don't think it does anything for our comprehensive position. But clearly getting the attitude to change towards South Africa is going to be the biggest impact we can do on addressing our South African discount.

Consumer value-accretive growth, I did say that this year would be one where we regroup. We wanted to close off the transactions we announced last year and that is so. I think next year with some deleveraging behind us and further delivery -- operational delivery, we would start looking at some specific growth opportunities.

As I said I would show you and I move down the global cost curves. And I think that's a very significant achievement considering the PGM businesses we purchased. And we expect to do exactly the same with (inaudible). In terms of gold I'm just scanning through new results that have been delivered over the last few days. And I think (inaudible) all-in sustained cost producer in South African. And I think we can do much better than where we are. So I look forward to us retaining our leading position in gold as well, but we don't have any specific information on gold in this presentation.

In terms of closing the transactions that we had entered into, the DRDGOLD one was an important one for us. It sets a path (inaudible) with what we consider valuable but noncore assets. And I think importantly the market should know that DRD will be fully consolidated into our operational and financial results going forward. And we think it's a well-run business and it should have a positive EBITDA impact. I'm not going to go through the details of the acquisition, they are listed there.

In terms of Lonmin we have made good progress as I said under the salient features. Looking forward, what is left is competition commission approval. We've had really constructive interactions with the South African competition commission. We do believe we would probably have finality probably by October, Richard? By October. And post that we will -- we will then look for shareholder approvals both from Lonmin and Sibanye-Stillwater shareholders. And from Sibanye's side that is really about authorizing the issues of more shares and then final court approval of the scheme. And that should happen late this year, very early next year time.

Just in terms of strategic evolution, is it yielding benefits. I would suggest that's yielding very significant benefits and I'll show in a few graphs. If we look and compare quarter-to-quarter, there is no doubt that our gold business can do better. But you can see the impact of the South African PGM and the U.S. PGM operations. Every quarter comparison there is a better result including the PGM business. And if you look at on a rolling 12 months adjusted EBITDA, slide -- the bottom slide, you can see that on a rolling 12-month average you can see the role that PGM is playing in our business despite the depressed platinum price. And you can see it's going up quarter-on-quarter on a 12-months basis.

So I know there will be a lot of you saying, yes, but what about your share price, you issued lots of shares. Well, we've always said we have a -- we take long-term views. We have a -- we have a view from when we listed and where we are today. And if you hone in on the -- on the rectangle you will see that there is really only a few companies that have outperformed us. And that's more recently. And these are international companies. We've clearly outperformed our South African peers. And it's only more recently where with I think (inaudible) a bit concern and we had our safety incidents, have we actually underperformed some of those better-performing companies above us. So I have no doubt, as we improve our safety, as we deliver into our debt, as we show further deleveraging we will get back on track and be a significant outperformer in this sector.

Of course we are price takers. And you have to look at those graphs recognizing the influence of the rand gold basket price which drove our share price very significantly a few years back. You have to understand the PGM basket price in 4E ounces. And you can see when we made our entries into the PGM sector I would suggest at a low. And you can see when we made our entry into the U.S. PGM sector was almost at an all-time low in terms of the 2E basket price. So I do think looking back in hindsight is a perfect a science, we have made very good moves and it is coming through in our relative performance.

In terms of more recently when you raise a convertible, everybody knows that the convert holders also shot your stock. And you can see how we went from a short position of about 2% on the rising of the convert. Went up to 8%. Of course, the tragic events resulted in further opportunistic shorting.

And you can see, as we've stabilized the business, as we've delivered, you can see how the short position has actually come down to slightly less than the initial short position when the convert was raised. And I would suggest that you will probably see that decrease as we go forward.

In terms of relative value. Well there is 101 ways of showing relative value. But I'm very pleased to say that if you -- and this is just one method you can do, EV per resource ounce, reserve ounce per production ounce. When we do it we seem to get very consistent sort of results.

So what we have here is the enterprise value of all of these companies divided by the EBITDA in 2018 and 2019. And a few years back we sat on the left-hand side of these graphs and this comparison. If you look at it today, I would say there is still lots of room for value upliftment. And certainly if you look at 2019 EBITDA numbers I would suggest that there will be some value upliftment as well.

And of course that's all dependent on doing the -- continuing to do the right things. But we are pleased with the way our strategy has impacted our value and our relative performance.

So with that let me conclude. Safety is a core value. It's our primary value. And the emphasis on safe production has been intensified to impact positively on safety. We believe we have delivered a solid result in H1 despite the numerous operational challenges that we've had and the challenging economic environment.

Delivery on strategic imperatives has continued to a significant deleverage and through the stream. Our strategy has been consistent and has resulted in a competitive performance relative to the majority of our peers. And we remain very focused on creating superior value for all our stakeholders.

Guidance has not changed with this presentation. And it is there in summary, I'm not going to go through it in detail. And we can really move to questions and answers now. But I did want to read a tweet that Gwede Mantashe put out a day or 2 ago. And I think it's so true, South African mining has a bad name because we are very loud about negative and very quiet about positive. "When you do good, you will not make it onto the news. We must begin to talk positively about our industry. It's a good industry, it makes things happen and it contributes to the economy." Compliments, Gwede Mantashe

All right. Questions.

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Questions and Answers

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Adrian Spencer Hammond, SBG Securities (Proprietary) Limited, Research Division - Research Analyst [1]

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Adrian Hammond from Standard Bank. Couple of questions. Firstly on Lonmin, when do you expect the shareholder vote to come through? And just on the second Comp Commission, seems to be taking a long time, almost a year in fact, so do you think it has something to do with the size of your business? And following on from that, and you mentioned a lot about communities and I think over 90,000 people, you're quite unique, and I suspected it will take a lot of time in terms of labor relations from your team. Do you think they are prepared to manage that? And are you concerned about potential social unrest with the upcoming restructuring invoiced in Lonmin?

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [2]

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Thanks, Adrian. And good questions. Look, the Comp Commission is only about 2 weeks beyond schedule. It does always take a long time. This has been a very complex transaction not so much about the competition issues, so the size of the company, that's not really the issue. I think it is the fact that we may -- we were very transparent in showing that the 3-year job loss profile is. And it's not based on the transaction, it's based on shafts coming to the end of their life. I have to -- so it's not unusual let me just say that. Our interactions with the Comp Commission, as I said, have been positive. There is a willingness to address the crisis that Lonmin finds itself in. And I think we are seen as an acceptable solution. Especially if you look forward and you believe in a changing platinum demand scenario, which we do, and which is why we've made these entries into this sector. In terms of communities, you can imagine there has been a lot of interaction between the Comp Commission and the communities. There has been a lot of interaction between the Lonmin and the communities. And in fact there has been a lot of interaction between ourselves and Lonmin's communities. And I do think we've got to a point where there is recognition. This is a new chapter. And if fact if we all are responsible and do the right things and create the right platform for profitability there is real uplift down the track. And I actually find the Lonmin community quite supportive. There is still an outcome from the Comp Commission required. And then of course there is probably a series of tribunal hearings. In terms of our capacity to address this, Rob has made significant internal changes to provide focus capacity to do it. But it's more than just a capacity to manage unhappy people, it's actually you got to deliver on the sort of things that are put up and we need some time to show that delivery like we've done in gold.

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Adrian Spencer Hammond, SBG Securities (Proprietary) Limited, Research Division - Research Analyst [3]

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Thanks. Just on the revisions to mining charter, do you intend toping up your BEE ownership levels?

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [4]

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Well listen, first of all we need a charter that actually we know what it's going to be. And of course whatever is agreed we will comply. Together with our beneficiation credits at the Rand Refinery, we think we exceed those levels. I know when I read analyst reports that is not acknowledged. So we actually believe that we have in excess of 30%. So but whatever is agreed and whatever is writing is we'll do.

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Unidentified Analyst, [5]

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It's [Serbie] from Vunani Securities. Neal, why are you still listed as gold (inaudible) when you are actually a North American palladium producer, that's my first question. And the second question is your EBITDA margins on your recycling business in North America is about 3%. I mean is that good enough given the huge amount of working capital that's tied up in recycling businesses.

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [6]

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Yes. Thanks, Serbie. And good question. Yes, we -- first of all we need to get our gold EBITDA up and then your question might not be as relevant. But there is no doubt that we are a precious metals company. I think we are listed as a gold company only by default. We are in the process of an internal restructure which will take place probably by the middle of next year where we won't be Sibanye gold trading as Sibanye-Stillwater, we will be listed under an appropriate sector on the JSE, which will probably not be gold. What that would be I can't tell you at this stage. But we recognize that and that is a unique combination of gold and platinum. But we are -- I think the bottom line is we are no longer only dependent on our gold business, we got a good gold business a good quality gold business, parts of it is under-performing but we have real flexibility because of our entry into the PGM sector. So your point is noted and we do have a plan in place to do that. Recycling, sorry. Well I keep telling Chris we need to up the margin, so why don't you answer it.

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Christopher M. Bateman, Sibanye Gold Limited - EVP & Head of US Region [7]

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Look, the recycling business (inaudible) working capital at the moment. We're looking at ways to finance that. But we pass that cost of capital on directly within our term. So between the time we receive it and the upturn days we charge a financing cost. So it is net neutral essentially in terms of the terms. It is a margin business. There is a very little work once we've received the recycling. It feeds through with everything else in our mine concentrate and the collectors to take that PGMs out. It gives us a substantial position in the market. So instead of being 600,000 ounce seller into the U.S. market where we are about 1.2 million, 1.3 million ounces that we are playing in, so it gives us some visibility certainly and it doesn't come with a lot of extra work. I think we will see margins increase in certain areas, particularly the diesel catalyst sector. But we will working on margins and we're pleased with the performance of the business.

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [8]

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There is one additional thing I would like to add, Chris, and that is one of our competitive edges that is developing, and I'm talking ESG now, is the U.S. PGM business is -- has the lowest emissions of any PGM produced in the world, whether it's -- whether you look at the smelter, whether you look at runoff from the mine. And that is going to become a competitive edge. Being in recycling is also an environmentally friendly and responsible thing to do. So these are the benefits of being in it. For instance offtake with Tiffany is a recognition of the high environmental standard. So those are things we'd like to actually bring across here. But recycling cannot displace underground production which is more profitable clearly.

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René Hochreiter, [9]

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It's René Hochreiter from Noah Capital. I see that you are addressing your SA discount still in the red. Could you share with us what sort of strategy you're looking at? Personally I don't believe you can get rid of the South African discount but maybe moving to a different part of the JSE on the board, what could you actually do to drop that discount, is it just EBITDA, improving your EBITDA?

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [10]

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Yes, look, when we talk South African discount, I think -- and it something that we don't have a lot of control over. And some of our peers have reduced their exposure to South Africa and yet they still retain very big discounts. So I think the strategy is more at this stage about improving the perceptions of South Africa. Now for the last few years we've had relationships with government which have not been good as an industry. We've had a government as we know that has -- has been -- has had other agendas, let's just say that. And we had a mines minister that really had no clue about what the industry was about. I'm pleased that's changed. And really the strategy is to influence and work with our new minister and current leadership to do the right things. For instance, there is an over-focus on transformation. There needs to be a focus on job creation and transformation will come with it. We understand they are under huge political pressure from a transformation side but it is not making the industry any more competitive. And it's through those interactions and understanding the tightropes that they are walking that I think we can change the South African discount in the short to medium term. Getting a charter that is more competitive than what it is that's going to result in investment. The current proposed charter will not result in investment, that's a fact. And I think there is a recognition of that. So I don't know what'll come out of those discussions. But that is the primary initiative in terms of addressing the South African discount. I'd also suggest that the rhetoric that comes out of organized labor doesn't sit well with international investors. And yes, we're in the middle of wage negotiations and we really have [NAMB] declaring a dispute on demands that are ridiculous. They will just lead to what you're seeing in the rest of the industry shaft and mine closures. That's not in anyone's interest, not in the national interest, not in the union's interest and certainly not in shareholders' interest. So we have to impact on organized labors well and try and find that balance. I supposed once you've done that. And in my mind that's 80% of changing the South African discount. You do need to address your risk profile. And right now whether we like it or not Sibanye is seen as having deep-level mines, and that has a certain risk profile which results in a certain discount factor. So moving to more mechanization even in South Africa where you can, acquiring high-quality assets internationally or certainly as a company impact our discount that we receive. So it's not a primary focus. That's why it is at the bottom of the list. I think we have some more immediate priorities to deal with.

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Nkateko Mathonsi, Investec Bank Limited (SA), Research Division - Research Analyst [11]

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Nkateko Mathonsi from Investec. My first question pertains to the class action in the U.S. related to safety incidents in South Africa. If you can just give us a bit of an update on that as to what is happening, what is the progress. And my second question is on the all-in sustaining cost for the SA PGM division, which decreased 2%, but part of it was because of lower CapEx. Why the lower CapEx? And are those the new levels of CapEx for the SA division?

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [12]

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Okay. So why don't I ask Charl to comment. Charl is dealing more closely with the class action. And then Rob, if you can comment on the CapEx profile.

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Charl A. Keyter, Sibanye Gold Limited - CFO & Executive Director [13]

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So in terms of the class action, not much is happening. Obviously there is currently 2 actions that are in place. We are trying to join those actions to minimize the overall cost of should this go to a court. But we believe that there is a high probability that this might even be thrown out in the early stages. This was based on some spurious claims by analysts and by journalists and that's where it started. So there is currently not much happening. The lawyers are dealing with it in terms of process.

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [14]

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Perhaps add on that those reporters that report what they hear from the unions must be prepared to sit in a court and explain where they -- how they corroborated that evidence. And the same with the analysts. This is a serious situation. Rob, you want to deal with the --

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Robert van Niekerk, Sibanye Gold Limited - EVP & Head of SA Region [15]

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Okay. The results we presented are for the first 6 months. One cannot look at capital spend over a 6-month window. You need to look at capital spend over a 12-month. And last year we spent on sustained business capital approximately ZAR 1 billion. This year we forecast (inaudible) business capital. That excludes projects of ZAR 1.2 billion. So over the 12-month period our capital spend is actually going to go up year-on-year.

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Yatish Chowthee, Macquarie Research - Gold Analyst [16]

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It's Yatish Chowthee from Macquarie. Just a couple of questions. Perhaps this one is for Charl. Just looking forward with the Lonmin transaction and the potential restructuring that comes along with it. Can you guide us as what sort of level of restructuring cost Sibanye would have to incur? And would you be dipping back into your debt facilities to facilitate those retrenchments or restructuring costs? Then the second question is around the uranium resources on the Cooke lease area. Has there been any further intention to actually realize value from those resources with DRD? And just lastly on the all-in sustaining cost guidance for the gold operations. I see it's between 515 and 530,000 a kg. What sort of level of wage increase are you utilizing here to get to that number? And given that the [NUM] has now disputed even an 8.2% increase is 530 perhaps low or how do you see that playing out?

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [17]

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Yes. So who wants to pick up the Lonmin restructuring cost? Will you pick it up, Charl?

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Charl A. Keyter, Sibanye Gold Limited - CFO & Executive Director [18]

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So if you look at the Lonmin restructuring cost, it is basically we're targeting about 850 to 900 people. And that cost is then estimated anything between ZAR 120 million and ZAR 180 million. The plan is not to go back into our facilities. Obviously we want to look at Lonmin on a standalone basis. But if it's required, obviously you buying down your cost profile going forward. Based on the current basket prices in excess of ZAR 14,000 per 4E ounce, we don't expect to materially dip into our credit facilities to facilitate the retrenchment costs at Lonmin.

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Yatish Chowthee, Macquarie Research - Gold Analyst [19]

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Sorry, you said between 900 -- 900 people?

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Charl A. Keyter, Sibanye Gold Limited - CFO & Executive Director [20]

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Yes. So I mean that will be --

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Yatish Chowthee, Macquarie Research - Gold Analyst [21]

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Relative to -- sorry, relative to the 12,600 what portion does Sibanye account for given Lonmin is in a restructuring process?

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Charl A. Keyter, Sibanye Gold Limited - CFO & Executive Director [22]

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Yes. So obviously we're looking at year 1. Year 1 there is about 900. Remember, Lonmin is carrying on with its process of rightsizing. And then obviously in year 2 and 3 there is this also quite a large number that we would have to incur. But as I said, we've identified close on ZAR 750 worth of synergies. And the labor component being one of that that will be realized very quickly. So almost more than 60% of that, call it ZAR 750 million will be realized in year 1. And that will obviously go towards funding of the retrenchment cost but also bringing down the overall cost profile.

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [23]

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So since you're supposed we -- in the short term it's self-funding. If you look at in years you may have to -- if you look at it 3, 4, 6 months periods you may have to dip into your working capital to fund it, but you get a very quick return on restructuring like that. Okay. Then your second question was uranium the resources. No, we -- I think, Richard, at this stage it's safe to say that those resources are not specifically earmarked for DRD. Do you want to comment on that?

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Richard A. Stewart, Sibanye Gold Limited - Executive VP & Head of Business Development [24]

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I think that's (inaudible). Yes, so if you look at the DRD transaction, that currently curved out all of the uranium resources. That's really (inaudible) on the gold side. For now we didn't feel we could value, realize any value for uranium given where the current prices are. So we have specifically carved those out as well as the Ezulwini uranium plant which we still got on care and maintenance. So at the moment that's sitting still squarely on our side until such time as we think we could get fair value for it which we still think there is a lot of value in those uranium assets.

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [25]

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Yatish did we cover all your questions? I think so.

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Yatish Chowthee, Macquarie Research - Gold Analyst [26]

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(inaudible) sustaining process (inaudible).

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [27]

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Yes, yes. Yes, look I -- I think there is a need for a reality check. And remember, these wage negotiations are still at a very early stage. I think job losses feature very highly on the national agenda. And I think once there is an -- there is intervention by government, we'll get to a logical place. But you know what, if we are one of the lowest cost producers and we're sitting at 520 and the gold price is sitting at 545, 550, whatever it is, there are serious implications of unrealistic wage demands. And you've seen them playing out not just in the gold sector, elsewhere. So there is a need for little bit of reality to set in. Perhaps from both sides, I'm not just saying it's one way, but the current demands are not reasonable. And you would note there is just about been no -- about no movement from organized labor. All the movement has been from the company. All right. Do we have any questions on the conference call?

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Operator [28]

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We have a question from Johann Steyn of Citigroup.

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Johann Steyn, Citigroup Inc, Research Division - MD and Head of South African Equity Research [29]

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You guys focused a lot on adjusted EBITDA throughout the presentation and it would be helpful if you just can tell us how much the individual businesses generated in free cash flow please?

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [30]

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All right. I don't know if we have that information. We don't have it on hand, Johann. We can send it to you.

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Johann Steyn, Citigroup Inc, Research Division - MD and Head of South African Equity Research [31]

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So at company level you've burned I think $60 million of which $54 million is admittedly Blitz. So at company level normalized but minus $6 million in free cash. Despite favorable prices and clearly low capital.

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [32]

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Yes. I wouldn't say it's at favorable prices. But I think your rough numbers are right. Do you want a breakdown, Johann?

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Johann Steyn, Citigroup Inc, Research Division - MD and Head of South African Equity Research [33]

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Well I think it would be helpful. There is obviously a lot of focus on adjusted EBITDA. And I think it would be helpful to get the bottom line of your numbers per business unit?

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [34]

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Certainly. Certainly we can do that and we'll send it to you, but the reason we focus on adjusted EBITDA is obviously because of the covenants associated with the bonds and our lenders which seems to be the primary focus of the investment community, but we'll certainly do what you have suggested and provide it to you.

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Operator [35]

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There are no further questions on the line.

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James R. Wellsted, Sibanye Gold Limited - Senior VP & Head of IR [36]

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Okay. Moving on to the webcast questions. From (inaudible). "Hi, Neal and team, the event that happened on 11 June involved a shift boss leading employees to a stop barricaded area. I'm more worried that someone as senior at operational level as a shift boss allowed employees into a barricaded area. It is not pleasing because safety should start with the leaders on the ground. Can you please outline to what extent safe production is incorporated into the employees incentivization in the form of bonuses?"

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [37]

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Yes, certain, and your concern is our concern because a shift boss is a supervisor. Our investigation show that there was no instruction higher up in the system for their shift boss to do it, so we need to understand what behavior drives a supervisor to do that. So we share your concern. And it's noted. And a lot of the interventions that I described at front which is about all our employees including supervisors making decisions based on our values. That is what can prevent an accident like that's happening again. In terms of incentives, the safety is a -- well Rob, why don't you discuss the safety incentives low down in the organization and I will cover the safety incentives higher up.

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Robert van Niekerk, Sibanye Gold Limited - EVP & Head of SA Region [38]

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Okay. Safety does feature in our production centers, and it features quite significantly. Having said that, it's not (inaudible). Our bonus does, at the lowest level in the organization, does reward call it output more than what it does safety. We are in the process of reviewing that to put a lot more emphasis on safe production. I can't (inaudible) all the numbers because it varies by level. And our underground worker is different to a miner, is different to shift supervisor who is different to a miner, yes. What I can tell you though is we have already reviewed that -- all the shift supervisor to place the emphasis on safe production in accordance with the law. We've actually revisited the percentage on middle management and as well as the safety people in our organization going forward is rewarded totally on safe production and there is no production (inaudible). Neal, I think you can talk to other changes.

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [39]

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Yes, so we generally reward for safe, cost, volume and grade. So when Rob says safety is not the biggest portion, generally will equal, we generally see those as equal incentives. So cost is -- cost reduction are rated the same as the safety incentive as is the quality of mining in terms of grade as is volume. At senior levels it's actually exactly the same. But we for this year the safety incentive will amount to just less than 40% of executive remuneration. So that is the high -- that will be the highest portion of safety in the gold, that's in the gold sector, in the platinum sector it's slightly different.

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James R. Wellsted, Sibanye Gold Limited - Senior VP & Head of IR [40]

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The next question from Phillip Vasconcellos. "Good morning, Mr. Froneman. I have a couple of questions. The first one comment on South African politics and farmland expropriation, how this affects your business?

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [41]

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Okay. Well I think any action that influences your legal right of tenure does not sit well with any investor anywhere in the world including South Africa. I have to say that even our features on American TV, as I heard this morning, I think we need to really just wait and see what the final policy is and if it proceeds. I fully understand as a South African I need to redress issues of the past. But when it's done in a way as it's being suggested, I think there is very significant implications for international business. How does it influence us? Well, I'm not sure. We certainly own a lot of land, but a lot of the land that we own we've already committed to agricultural initiatives for the upliftment of communities. And that's together with, let's say, some of the government-owned institutions. And hopefully we will be announce progress on some of those in the next 3 to 6 months. And it's not being done because of expropriation without compensation. These initiatives we've worked on for probably 18 months, 2 year. In terms of other assets in the company. Well, I really don't feel exposed. And it's because I feel that we do a good job in terms of delivering on our social commitments. Other than that, I really don't want to be politician.

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James R. Wellsted, Sibanye Gold Limited - Senior VP & Head of IR [42]

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Just a comment on the platinum, the current price -- platinum price and how we see the outlook, when we expect it to turn after a 10-year down cycle?

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [43]

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Yes look, our models show probably another 2 years, maybe maximum 3 years. That's assuming things stay as are. So as long as international economic growth is where it is, as long as producers do what they are currently doing, so this doesn't factor in, say, the announcements by Impala. But we have said that the changes in the platinum price are going to come from a change in supply. There is an oversupply. Demand is demand, and unless something new happens demand will stay roughly the same, it will edge up slightly. So our entry was always based on a 3-year depressed platinum price. Our entry into the U.S. was based on our view that palladium price would increase. And the graph I showed you when we made our entry, and so far we seem to have call that right. Rhodium has done what it's done. So I suppose you can't be exact. But certainly the way we've integrated these assets, the way we address the risk of acquiring Lonmin is through having a cost structure that ensures we can actually even prosper at these prices. The real upside we expect in 18 months, 2 years, maybe 3 years’ time. But certainly within that timeframe we can hold on.

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James R. Wellsted, Sibanye Gold Limited - Senior VP & Head of IR [44]

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The third question, I think we've covered quite extensively, was on the stock prices and the performance recently relative to our peers and the valuation. But I think that's been covered. So the next question is from [Peter Kornberg] at [Mergermarket] probably directed to Charl is, "What options are being considered for refinancing of the rand RCF maturing next year?

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [45]

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Yes, thanks, James. I mean, obviously we will just go through the normal cycle. It's basically we are looking at just refinancing it on similar terms to what we've done with the recent dollar facility. So similar amount. Probably pushing the banks for a little bit of better terms.

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [46]

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I hope the banks were listening.

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James R. Wellsted, Sibanye Gold Limited - Senior VP & Head of IR [47]

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The next one is from Magnus Scherman at Reorg. "How large a fine do you expect to receive from the South African regulators for safety issues in H1?"

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [48]

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I don't expect any fine, 0. I think if we thought that we had any exposure due to negligence, my answer would be very different. But I think let's wait for the investigations.

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James R. Wellsted, Sibanye Gold Limited - Senior VP & Head of IR [49]

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It's [Deon Fenvake]. Question perhaps for Charl is can you explain the section on dividends and the results?

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Charl A. Keyter, Sibanye Gold Limited - CFO & Executive Director [50]

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Yes, obviously we haven't declared a dividend. If you look at -- our dividend policy is between 25% and 35% of normalized earnings and our normalized earnings for this half year was a loss of approximately ZAR 500 million and based on that the board decided not to pay a cash dividend.

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James R. Wellsted, Sibanye Gold Limited - Senior VP & Head of IR [51]

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There is a follow-on about the scrip dividend. Are you intending to pay a scrip dividend?

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Charl A. Keyter, Sibanye Gold Limited - CFO & Executive Director [52]

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I mean, we've obviously looked at that. And feedback we got from investors is that they don't like the scrip dividend or the capitalization issue. And based on that feedback we've also decided not to continue with that. But if you look at the loss due to the -- the normalized loss. I mean, we wouldn't have been able to pay that anyway.

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James R. Wellsted, Sibanye Gold Limited - Senior VP & Head of IR [53]

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And then finally from [Erin Vora]. Question on hedging, have we done any further hedging?

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Charl A. Keyter, Sibanye Gold Limited - CFO & Executive Director [54]

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Yes, obviously we've looked at some hedging in the gold operations. Currently we've got about 25% of our annual output hedged. We've used 0 cost colors. And it ranges with flows of about on average ZAR 540,000 a kilo, going as high as ZAR 610,000 a kilo. So we've built in some downside protection. Year-to-date we realized ZAR 60 million out of that hedging program.

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James R. Wellsted, Sibanye Gold Limited - Senior VP & Head of IR [55]

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Thanks. That's the end of the questions from the webcast.

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Neal John Froneman, Sibanye Gold Limited - CEO & Executive Director [56]

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All right. Thank you everybody. And I know it was a long session and presentation but I hope you find it useful. Please have a safe day. Thank you.