Neal Froneman on his plans to take over the world, one mine at a time
Neal Froneman has come a long way since starting as a junior engineer in the Libanon gold mine in the 1980s. It was the creation of Sibanye Gold in 2012 that holds the key to his growing stature as a big-time mine czar. Giulietta Talevi spoke to him
Q The two latest deals you’ve done — buying Aquarius Platinum and Amplats’ Rustenburg mines — is this the culmination of your platinum ambitions or the start? A I think it’s a really good beginning. There’s more to do but we have made material steps into the platinum sector.
We were a little concerned that the market was going to change, so it was important to get these deals done. We’ll apply the same discipline: be prudent in any further steps we might make. But if we make no further steps, this is still a decent position. QWhat
do you mean about being concerned the market was going to change? A We felt there was certainly the potential of some further downside, but [that] we were very close to the bottom, if not at the bottom, and therefore it was important to complete these two transactions, or get agreement, and I think we’ve been proved right. The platinum group metals [PGM] prices have moved, sentiment has definitely changed and I think our timing couldn’t have been better. Of course we’re also acutely aware that a turn doesn’t mean there will be a rapid increase in price in the short term. It could take another six to 18 months to see a sustainable increase in PGM prices. QWhat
about the VW fallout? Could this have a long-term effect on platinum demand? A It’s a storm in a teacup from a platinum demand point of view. If anything, it’s going to have the opposite effect to what seems obvious. Because [VW] have been “thrifting”, in all likelihood it’s going to lead to an increase in demand as they have to now correct the thrifting ...
The suggestion that the diesel engine is now something of the past is ludicrous. Has it affected perception of diesel engines? Absolutely. But are people going to rush out and sell their diesel engine cars? No. Are people going to stop buying diesel engine cars? No. So, I think we’ve seen a knee-jerk reaction and logic will prevail because there’s nothing wrong with diesel engines. QDo
you think the platinum industry became too fragmented? A Until recently, there’s been no negative consequence of being a fragmented industry. But as an industry matures, inefficiencies creep into a business, and the gold industry went through the same process. At one time there were over 40 listed gold companies. Right now there are four or five. To survive, as you become more mature, consolidation is necessary. QThe
two deals you’ve struck will cement Sibanye’s position. But is there a point at which you find yourself financially stretched? A We definitely have the backing. And we are acutely aware of using too much debt. But I think it’s important to note that any acquisitions would [have to] have positive cash flow associated with them. You can extend debt without necessarily increasing your net debt-to-Ebitda ratio, which is an important factor. Again, we don’t look at the entire sector and say it’s our job to consolidate. There are some very logical, value-accretive opportunities related to the assets we’ve bought that I think will flow through. Q Will backing come from shareholders or lenders? A Both. We’ve got very supportive debt funders in the form of banks ... We also have strong support from some of our shareholders, particularly the Chinese. QWho
are your Chinese investors? A Baiyin Nonferrous Group holds all the investments in Sibanye through Gold One. It’s a consortium of CITIC (China’s biggest conglomerate) and the China Development Bank. QOne
of the reasons you bought Kloof, Driefontein and Beatrix mines to create Sibanye was to give those assets focused attention. Given all this empire building, do you not risk neglecting those assets? A Nothing has changed from a strategic point of view. The gold business is in a steady state. Our strategy of creating more sustainability from a dividend perspective has resulted in the acquisition of the platinum assets. This is not so much about us going into platinum or diversifying, it’s about acquiring assets that under slightly different