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Johannesburg – Sibanye-Stillwater [JSE:SGL], which has grown from one of the country’s junior gold mining firms to a giant producer, isn't ruling out future acquisitions beyond South Africa's borders, according to CEO Neal Froneman.
The company - created five years ago through the unbundling of Gold Fields - has grown to become the country’s top gold producer, with major assets in platinum.
“We would still like to acquire some gold assets overseas, because we have established a North American team to improve our exposure to gold,” said Froneman in an interview with Fin24.
“There is not a lot left in South Africa from the precious metal perspective,” he added.
The diversified company’s acquisition trail has seen it buy Anglo American Platinum's Rustenburg operations in 2016, followed by Aquarius Platinum.
Its 2017 acquisition of American platinum company Stillwater for $2.2bn has been the company’s biggest purchase so far.
“I like gold,” said Froneman.
“We are not moving out of gold, despite the fact that we have made some very significant PGM (platinum group metal) acquisitions,” he said.
He described gold as a “safe haven for commodities”, while acknowledging the challenge posed by the rand-dollar exchange rate to commodity prices, after the currency made some significance gains over the last three months.
“I believe the rand will weaken, and that would be beneficial to us,” he said.
Froneman’s straight-talking personality has earned him a reputation as something of a maverick in the mining industry. He is known as “Mr Fix-it”, due to his reputation for turning around non-performing assets long before he joined Sibanye in 2013.
“We have already demonstrated our ability to acquire, close deals, and integrate them into our business,” he said, dismissing criticism that the company might have bitten off more than it can chew in its short existence.
Reducing debt
While more acquisitions may be in the company’s future plans, Sibanye’s more pressing challenge appears to be debt.
Froneman said it would take the company between two and four years to reduce its “substantial” debt position, which it acquired largely to finance its merger with Stillwater.
“We very consciously took on debt in 2017, to acquire what is probably the best PGM company in the world,” said Froneman.
“We are looking at deleveraging down to levels which are considered normal, and that process would take between two and four years."
Sibanye’s net debt is 2.6 times its underlying earnings, and the company is looking at deleveraging down to one. The ratio is an indication of how long a company would take to operate at its current level to pay off debt.
Running Sibanye’s loss-making operations also put pressure on the balance sheet, leading to the closing down of Cooke gold mine late last year.
Cooke mine had to put 3 375 workers on voluntary dismissal while Beatrix West was restructured, also shedding jobs.
“I think we should have closed down Cooke quicker and made less losses,” he said, stating that the mine, located in Randfontein, is still a valuable asset to anyone who could “run it cheaply”.
The takeover of London-listed Lonmin is the latest transaction, set to further entrench the firm's status as a mining giant.
The R5.17bn deal is expected to be concluded before the end of the year after satisfying competition regulations.
New minister 'understands the business'
Froneman described the appointment of new Mineral Resources Minister Gwede Mantashe as a positive move, saying he was the first person with an understanding of the industry to head the portfolio since 1994.
“I think we have a minster that we can work with. He understands the business and I just pray that he does the right things to achieve the balance that we need,” he said.
“He has worked in the mines and that brings a huge amount of confidence,” he added. Mantashe is currently holding consultations with mining communities on the Mining Charter, which seeks to boost black people’s participation in the sector.
The controversial charter is being challenged by the mining industry, with claims that it would discourage investment and destroy business. The Mining Charter was gazetted in 2017, and aims to increase black shareholding in mining companies to a minimum of 30%.
“If the revised Mining Charter finds its way as a final charter, there will be no further investment and mining will become a sunset industry,” warned Froneman.
Mantashe has set himself a three-month target to reach an agreement with stakeholders on the charter, which is widely supported by government.
