Sibanye retains its appetite for gold

Gold and platinum miner Sibanye Gold, which has rebranded as Sibanye-Stillwater after the substantial $2.6bn acquisition of US platinum group metals (PGM) producer Stillwater, still has an appetite for acquisitions in the gold sector.

CEO Neal Froneman said on Wednesday that Sibanye liked gold and it was not its intention to be a PGM company.

It made the Stillwater acquisition because PGMs were at an attractive point in the cycle. It had been difficult to find valueaccretive gold transactions but management was still looking.

Sibanye has grown from a market capitalisation of R10bn in 2013 to a R44.9bn after a series of acquisitions, including the Cooke shafts, Burnstone, Rustenburg Platinum, Aquarius Platinum and Stillwater.

It has also been widely speculated that Sibanye held talks with PGM producer Lonmin in 2016, but there was no deal.

Sibanye initially funded the Stillwater deal with a bridging loan and Stillwater’s own cash. It has refinanced this through a

$1bn rights issue and a $1.05bn bond. It has still $361m to refinance, which will be done before the end of 2017.

“Yes, our balance sheet at the moment is a restraint,” Froneman said. “If we were to do anything in the next 18 months it would have to be for equity, but our equity has not yet rerated sufficiently. We have made commitments to our lenders to deleverage our balance sheet, but we cannot always pick the timing of transactions.”

In the six months to June, Sibanye’s revenue grew 31% to R19.2bn compared with the same period in 2016 as the inclusion of PGM operations offset lower gold output.

After various one-off costs and impairments, a R1.1bn provision for a settlement with silicosis claimants and higher finance costs and fees incurred on the Stillwater deal, its net loss was R4.8bn, against R88m profit previously.

Sibanye did not declare a cash dividend but will issue two capitalisation shares for every 100 held. Froneman said more capitalisation share issues were likely in the next couple of reporting periods as Sibanye focused on conserving cash for debt repayment.

Rene Hochreiter, an analyst at Noah Capital Markets, said Sibanye’s forecast that its second half would be stronger was welcome, although it would be a stretch to make up the first-half loss. Hochreiter also welcomed the declaration of a two-for-100 share capitalisation issue. The 2% dilution was immaterial for a company whose share price could rise 6% in a single day.

Froneman said the group was not considering splitting into South African and US companies. Due to mining and commodity risks, it was better to be a large, diversified producer.