En­tre­pre­neur to some, reck­less to oth­ers, one thing is for cer­tain: the Sibanye chief ex­ec­u­tive has a pen­chant for tak­ing the road less trav­elled

CityPress - - Business - MAR­CIA KLEIN business@city­

Neal Frone­man’s of­fice at Sibanye Gold’s rel­a­tively mod­est head­quar­ters in the min­ing town of We­stonaria, western Gaut­eng, is dom­i­nated by a paint­ing of a For­mula GTI car, which he once drove com­pet­i­tively. He’s a bit old for it now, but he still likes to be be­hind the wheel of fast cars, boats, he­li­copters and planes.

His ap­petite for risk is not re­stricted to his pri­vate life. In the cor­po­rate world, de­pend­ing on how much you like him, his pen­chant for risk would likely be read as “en­trepreneur­ship” by his fans and “reck­less­ness” by his de­trac­tors.

The Sibanye CEO has had a var­ied ca­reer, with some suc­cesses and some fail­ures. Some call him Mr Fixit, while oth­ers are not as gen­er­ous.

But few would dis­pute his abil­ity to take the road less trav­elled. Sibanye is an ex­am­ple. He took over the bulk of Gold Fields’ South African as­sets and made a suc­cess of it. It is the low­est-cost pro­ducer and the high­est payer of div­i­dends in the gold sec­tor, and is now well placed to play a piv­otal role in con­sol­i­da­tion and re­struc­tur­ing in the trou­bled gold and plat­inum sec­tors.

It is com­pletely fo­cused on South Africa and on pro­duc­ing div­i­dends for share­hold­ers. Its share price growth in the past year has been such that it is now worth almost dou­ble Har­mony Gold, where Frone­man once worked.

His record at Aflease, Ura­nium One and Gold One In­ter­na­tional has been mixed, with Ura­nium One be­ing the least suc­cess­ful of his ven­tures.

Frone­man says he is en­tre­pre­neur­ial and “what some crit­ics don’t un­der­stand is you can have dif­fer­ent strate­gies at dif­fer­ent times”.

Ac­cord­ing to him, mar­ket dy­nam­ics were dif­fer­ent be­fore 2008.

“There were op­por­tu­ni­ties in ura­nium, where there was a short win­dow that re­quired tak­ing sig­nif­i­cant risk, and we were mostly suc­cess­ful. It was a strat­egy at a point in time,” he says.

Since 2008, share­hold­ers want re­turns, and this is where his fo­cus is now.

With this in mind, there is some ner­vous­ness around Sibanye. When Frone­man in­di­cated a few months ago that Sibanye was look­ing at plat­inum ac­qui­si­tions, there was some con­cern he might be run­ning out of steam at Sibanye and needed ac­qui­si­tions to keep grow­ing. At the time, Frone­man said this was sim­ply not true.

Since then, his in­ter­est in plat­inum has thawed.

RISK TAKER Sibanye Gold chief ex­ec­u­tive Neal Frone­man

An­glo was first to say it was look­ing at sell­ing its Rusten­burg mines after the strike. But the sale process has been slow.

“We can still see op­por­tu­ni­ties – smart op­por­tu­ni­ties that will re­alise syn­er­gies across com­modi­ties. But it is such a slow process, we are los­ing in­ter­est fast. Those com­pa­nies that pro­moted the sale of as­sets are tak­ing so long, it is cre­at­ing un­cer­tainty for our share­hold­ers – there needs to be move­ment,” he says.

He reck­ons the plat­inum sec­tor ex­pects that price changes in the short term will be its saviour. His view is that prices will take longer to im­prove and that in the in­terim, there is an ur­gent need for the in­dus­try to re­struc­ture.

Sibanye had iden­ti­fied five op­por­tu­ni­ties that are now whit­tled down to two. “Now all we are do­ing is main­tain­ing a watch­ing brief,” says Frone­man.

Some­thing that may be higher up on the agenda is con­sol­i­da­tion in the gold sec­tor – where Sibanye is per­fectly placed. With the gold price drop­ping, and AngloGold’s failed cap­i­tal-rais­ing and de­merger plans, gold ac­qui­si­tion op­por­tu­ni­ties could be plen­ti­ful.

Frone­man says gold com­pa­nies im­proved their cost struc­tures and all-in costs. Any fur­ther im­prove­ments will be mar­ginal, but all in­cur sig­nif­i­cant cor­po­rate and re­gional over­heads amount­ing, ac­cord­ing to his cal­cu­la­tions, to R1 bil­lion a year.

“That is where there can be a quantum leap in terms of be­ing com­pet­i­tive in the gold sec­tor. There are four ma­jor com­pa­nies and I think there is only room for two or three,” he says.

AngloGold, which is ru­moured to be look­ing at the sale of South African as­sets as a plan B, has qual­ity as­sets that would fit well with Sibanye. Sim­i­larly with Har­mony, which looks vul­ner­a­ble given its costs and the de­clin­ing gold price.

Frone­man has re­cently re­turned from a “no-deal road show” in the US, where he found it as dif­fi­cult as ever to con­vince po­ten­tial in­vestors to put money into the South African min­ing sec­tor.

They re­main re­luc­tant on two key is­sues, ac­cord­ing to Frone­man: labour re­la­tions and lack of clar­ity on the reg­u­la­tory en­vi­ron­ment.

“This is sad for me and con­firmed that des­ti­na­tions in ar­eas I know are less than SA – like Zim­babwe and Congo – are per­ceived to be bet­ter in­vest­ment des­ti­na­tions.

“De­spite Sibanye be­ing the high­est div­i­dend yield gold company in the world – more than dou­ble the best US gold company – we are not get­ting the recog­ni­tion,” he says.

But Asian in­vestors re­main fairly pos­i­tive and it is un­der­stood they would be in­ter­ested in fund­ing any ac­qui­si­tion Sibanye may con­clude.

De­spite loom­ing re­trench­ments at its Cooke op­er­a­tions, Sibanye is try­ing to im­prove labour re­la­tions and the lives of its work­ers. It is help­ing many of them with debt is­sues and look­ing at hous­ing ini­tia­tives.

Mem­ber­ship of the As­so­ci­a­tion of Minework­ers and Con­struc­tion Union (Amcu) is ris­ing on Sibanye mines. Frone­man says he sees lit­tle dif­fer­ence be­tween Amcu and its ri­val, the Na­tional Union of Minework­ers, say­ing they both fo­cus on “mem­ber­ship rather than mem­bers’ in­ter­ests”.

What irks him most is “the com­plete lack of will­ing­ness of lead­ers to deal with the un­sta­ble labour en­vi­ron­ment”.

Small changes to the Labour Re­la­tions Act, like se­cret bal­lots, would go a long way to bring sta­bil­ity to the sec­tor, he says.

“The re­la­tion­ship be­tween gov­ern­ment and labour re­sults in spin­ning wheels, and we are go­ing nowhere.”


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