Reducing debt now Sibanye’s primary focus
Sibanye-Stillwater, a platinum group metals (PGMs) and gold miner, will give itself a threeyear breather to reduce debt and lift its share price so that it can once again look seriously for growth after a heady spell of expansion in PGMs that make it one of the world’s leading players in the metals.
Sibanye, which will vault into second place of global platinum producers once it has completed the all-share takeover of Lonmin, the world number three platinum miner, has stretched its balance sheet to the maximum, loading it with debt to fund the $2.2bn cash purchase of the US’s Stillwater Mining, a palladium and platinum miner.
While its shares have outperformed those of its South African gold and platinum peers, Sibanye’s market capitalisation is half of the firm’s enterprise value, something that will change as it repays debt and restores its balance sheet, CE Neal Froneman said on the sidelines of the African Mining Indaba in Cape Town.
“We can’t use cash to do mergers or acquisitions because we are highly geared as it is and our primary focus is to deleverage our balance sheet. Until our shares rerate we will find it very difficult to use equity,” he said.
“Lonmin was one of the few cases where our shares traded at a significant premium to the target, but you won’t find that in North America. It will be difficult to find that,” he said.
Sibanye is casting its gaze to the Americas in the hunt for gold and silver, but it is in no rush to pursue another deal just yet and won’t rush into another transaction, he said. “We are not deal addicts,” said Froneman.
He said Sibanye had told the market and investors of a fourdoing,
WE CAN’T USE CASH TO DO MERGERS OR ACQUISITIONS BECAUSE WE ARE HIGHLY GEARED AS IT IS
stage entry into platinum, which it duly acted on, buying Aquarius Platinum, the Rustenburg mines from Anglo American Platinum, Stillwater and then finally Lonmin, which gives it smelters and refineries.
“I think investors are now seeing the smartness of the deals we’ve done.
“When we first did deals they’d say ‘what the hell are you this doesn’t make sense’. Now they’re saying ‘this is smart’.” And so our credibility for doing smart deals has improved,” Froneman said.
There is little remaining of any size in SA, with major companies disposing of South African mines and investing abroad. Gold Fields formed Sibanye when it unbundled three deep-level gold mines, leaving it with just the South Deep gold mine close to Sibanye’s Kloof mine.
AngloGold has just sold its Moab Khotsong mine to Harmony Gold for $300m cash and its Kopanang mine to China’s Heaven Sent, leaving it with a single underground mine.
AngloGold’s Mponeng mine is close to Sibanye’s Driefontein. Given the Sibanye strategy in South African platinum of melding together a long stretch of the platinum belt into a single company under one management and shared services, it is likely that Mponeng or South Deep could be of interest to Sibanye if either AngloGold or Gold Fields decided to end their presence in SA and focus purely on their international portfolios.