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Clever, ruthless and lucky.” That’s how one industry analyst describes Neal Froneman, a 56-year old mechanical engineer who runs Sibanye Gold, the R17bn gold producer.
Sitting in Sibanye’s corporate office at Libanon gold mine near Carletonville, west of Johannesburg, the place where he took his first job as a junior miner 31 years ago, Froneman doesn’t quite strike one as the Bond villain sketched by the analyst.
As far as hatching cunning plans go, the only visible evidence connecting Froneman to R9bn worth of corporate activity in four breathless weeks during September and October, is a map (or ‘plan’ in mining-speak) on his desk.
It shows Sibanye Gold’s recent purchases: the Rustenburg mines of Anglo American Platinum (Amplats), and to the south, in what looks to be a stone’s throw, the shafts of Aquarius Platinum.
There’s a line bolded in demarcating a rail line that runs through both properties as if the ownership boundary shouldn’t be there. That, says Froneman, is exactly the point – and just one of the reasons why, logistically, buying these assets is an exercise in common sense.
Neither transaction is yet complete, with the purchase of the Amplats mines in Rustenburg facing a year of legal and regulatory hurdles. There’s also opposition to the R4bn bid for Aquarius Platinum which John Biccard, portfolio manager at Investec Asset Management, believes is an act of Froneman opportunism.
Froneman acknowledges there’s a degree of opportunism in his firm’s recent corporate efforts, but with the platinum market heavily over-supplied, and with asset valuations reflecting the surplus, he doesn’t take credit for the timing of the Aquarius or Amplats bids.
“We’re not as clever as we look when it comes to the market, but we do have longer term positive views on [platinum] supply and demand,” he said in the interview with finweek.
“I’d love to claim credit for looking clever, but we worked on [Amplats’] Rustenburg for probably 18 months,” he said.
The bid for Aquarius was actually an earlier corporate ambition even though the offer only materialised after Sibanye had bid a figure of R4.5bn for the Rustenburg mines (which could increase depending on performance of the shafts).
“Aquarius was actually the first transaction we looked at in late 2013, but the company’s balance sheet was a mess,” he says. “It had to be restructured. We had very initial discussions with Jean Nel (CEO of Aquarius Platinum) but these things take time.
“The market could just as easily have gone up and we could have missed the opportunity,” says Froneman. “The market didn’t, but I suppose you can say we had the tenacity to enter it and I think our entry actually changed the sentiment of the market, which was quite strange.”
Investec’s Biccard has urged Aquarius Platinum shareholders to vote against Sibanye’s offer of some R2.66/share which, at the time it was made public on 6 October, was a 62% premium to Aquarius’ volume-weighted average share price of R1.64/share.
“Investors should not be looking at a 100% premium to the 12-month low being offered, but rather focus on the fact that Sibanye is buying two quality assets at 4% of their 10-year high valuation,” argued Biccard.
Expanding into coal
Squeezed between the offer for the two platinum assets, Froneman’s Sibanye also announced it may take control of a “secured convertible note” amounting to AU$22.5m (about R225m) in Waterberg Coal Company (WCC), a Johannesburg- and Sydney-listed firm that is developing a thermal coal mine in SA’s Limpopo province.
Once it has recapitalised WCC, Sibanye will have enough shares in the company to control it, provided the deal passes a due diligence.
But why is a gold producing company, having recently signalled diversification into platinum, now taking on coal?
This is an excerpt from an article that originally appeared in the 3 December 2015 edition of finweek. Buy and download the magazine here.
