Froneman takes the platinum plunge
Neal Froneman has finally turned his well-publicised desire to buy the Rustenburg mines of Anglo American Platinum (Amplats) into actual negotiations.
If the deal goes through, Froneman – now almost through his third year at the helm of Sibanye Gold – will become arguably the most important man in South African mining.
The plan to turn Sibanye, already the healthiest and most cash-flush local gold mining company, into a platinum and gold group, bucks the overwhelming trend among the major mining companies to split up their holdings into smaller companies.
There haven’t been any major South African gold and platinum interests housed under one corporate umbrella since Anglo American divested of its last shares in AngloGold Ashanti almost a decade ago.
The Amplats acquisition would make Sibanye the country’s major precious metals company and probably the largest single employer in local mining – after the combining of Sibanye’s 36 000-odd workforce with Rustenburg’s more than 16 000 employees.
Froneman has distinguished himself from other mining bosses in South Africa by adopting a less diplomatic approach to labour issues. He also has a contrarian dedication to traditional labour-intensive South African deep-level, hard-rock mining – labour being the one thing everyone else is hellbent on reducing.
Despite the fact that Froneman had expressly announced more than a year ago that he wanted Rustenburg, so many people were surprised by Thursday’s announcement that Amplats’ share price shot up 9.3%. Sibanye’s shares also rose, but by 3.5%.
No prices have been mentioned in public. But Froneman made a point last year of publicly declaring Amplats’ valuation of Rustenburg – at $1.4 billion (R19.2 billion) – as far too high.
Things have got worse since that figure was quoted more than a year ago, so Amplats is most likely talking about a more modest figure now.
Sibanye recently shored up its kitty with a new $350 million credit facility, on top of the R1.3 billion credit it already had in hand. Money should not be a problem, but Rustenburg is hardly the only thing Sibanye wants to get its hands on.
Despite earlier saying he did not want to buy platinum mines unless he had a good platinum smelter, Froneman’s talks with Amplats do not include a smelter. He will have to find one.
In a financial report last month, Sibanye announced it was building its own solar power plant – and might want to set up its own coal power plant with a dedicated coal mine – to reduce its dependence on Eskom.
The differences between the Rustenburg platinum mines and Sibanye’s Carletonville gold mines are stark.
In its latest results to the end of June, Sibanye reported operating margins of 33% at its three major mines, Driefontein, Kloof and Beatrix. Amplats reported an operating margin of 7.5% in Rustenburg.
EMPIRE BUILDER Neal Froneman, chief executive of Sibanye Gold