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Sibanye Gold, AngloGold Accused of Violating Safety Laws in South Africa

- By Alberto Abaterusso

According to Bloomberg.com, Sibanye Gold Ltd. (SBGL) and AngloGold Ashanti Ltd. (AU) have been accused by South Africa of refusing "to comply with the country's mining laws," and "putting workers' lives at risk in an ongoing dispute over safety stoppages."

On the other hand, Sibanye Gold and AngloGold Ashanti blame the inspectors of the South African government for being too strict when temporarily shutting down the mines for safety reasons.

Last October, the court decided to cancel a notice received by AngloGold to close its Kopanang mine. AngloGold says that the mortality rate decreased by 80% over the last 10 years at its operating mines.

Bloomberg also reports that "Sibanye is suing Minister Mosebenzi Zwane and other officials for compensation after its Kroondal platinum mine was closed."

AngloGold Ashanti runs 17 mines in South Africa over three areas of operation:

  1. The Vaal River area, where the company runs Kopanang and Moab Khotsong mines.
  2. The West Wits area, where the miner operates Mponeng and TauTona mines.
  3. From surface operations, AngloGold Ashanti produces gold and uranium as a by-product.

In 2015, AngloGold Ashanti produced 1,004,000 ounces of gold from the South African operations. The percentage of the South African's contribution to the total group production is 26% in terms of gold output. The Vaal River accounts for 37% to the regional production, the West Wits with 43% and surface operations with 20%.

In the third quarter of 2016, the miner produced approximately 234,000 ounces of gold from its South African operations.

Sibanye Gold is a South African gold mining company with gold and platinum mining operations in South Africa and Zimbabwe.

Gold production is derived by operations that the company runs in South Africa. In 2015, from the South African operations, Sibanye produced approximately 1,536,000 ounces of gold.

In the third quarter of 2016, Sibanye produced approximately 382,500 ounces of gold and 52,480 ounces of platinum, with the South African operations contributing for approximately 67.6% of PGM 4E (Platinum, Palladium, Rhodium and Gold) production, which is derived from underground and surface operations.

On Jan. 27, AngloGold Ashanti closed at $12.00 per share, up 26 cents from the previous close with a PB ratio of 1.86 and a PS ratio of 1.22.

The EV/Ebitda ratio is 5.86. The analysts' average target price is $16.27 per share, which represents a 35.6% upside from the current share price. The recommendation rating is between a buy and a hold.

Sibanye Gold closed at $8.56, up 25 cents from the previous trading day, with a PB ratio of 1.93 and a PS ratio of 0.99. The Enterprise value is $2.42 billion and the EV/Ebitda ratio is 3.71.

The analysts' average target price is $14.60 per share and the recommendation rating is 2.3. The recommendation rating ranges between 5.0 (Strong Buy) and 1.0 (Sell).

During the third quarter of 2016, Ron Baron (Trades, Portfolio), First Eagle Investment (Trades, Portfolio) and John Paulson (Trades, Portfolio) reduced their positions by 11.11%, 8.84% and 0.29% in AngloGold Ashanti, while Mario Gabelli (Trades, Portfolio) increased his position by 2.36%.

During the third quarter of 2016, Gabelli sold out his position in Sibanye.

Disclosure: I have no positions in any stocks mentioned in this article.

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This article first appeared on GuruFocus.