Loading ...A year ago, South Africa’s biggest gold producer was churning cash, sizing up acquisitions and plotting expansion projects. Today, Sibanye Gold Ltd. is making losses and shutting mines.
The main difference between then and now? A big rebound in the rand.
High costs and labor-intensive operations mean that Sibanye and other South African producers are highly leveraged to one of the world’s most volatile major currencies.
Sibanye expects to report a first-half loss of at least $360 million, compared with a $22 million profit a year earlier, the company said on Thursday. The loss was partly due to the rand, which averaged 14 percent stronger during the period, and a big impairment charge on unprofitable mines it plans to close.
Since the first discovery near Johannesburg in 1886, gold hasn’t been hard to find in South Africa, which was the world’s biggest producer of the metal for a century until 2007. But with many of its mines dating back to the 1950s and 1960s, much of the low-cost metal has been found. That means production is now located much deeper in the Earth and costs more to extract.
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