Finweek English Edition - - FRONT PAGE - BY DAVID MCKAY

Neal Frone­man, the bull­necked, no-non­sense leader of Siba nye Gold, has at­tracted his fair share of crit­i­cism over the years. His credo is some­thing akin to “don’t die won­der­ing”, and he won’t. Deal­mak­ing in Aflease Gold, Ura­nium One and Gold One In­ter­na­tional – com­pa­nies he pre­vi­ously man­aged – re­turned mixed re­sults, hence the widely dif­fer­ing per­spec­tives of Frone­man’s ca­reer. In­vest­ing with him is, to res­ur­rect the cliché, a roller-coaster ride.

So it’s no great sur­prise to see that in just over two years into the job at Sibanye – surely his big­gest as­sign­ment yet – Frone­man has been an ac­tive com­men­ta­tor, if not player, in the merger and ac­qui­si­tion (M& A) of South Africa’s pre­cious me­tal as­sets.

In Au­gust 2013, he is­sued 17% of Sibanye’s shares, equal to R1.2bn, for the Cooke 1 to 4 un­der­ground gold shafts on the West Rand, as well as a large par­cel of gold dumps con­tain­ing gold that is now mine­able given to­day’s tech­no­log­i­cal ad­vances in ex­trac­tion. A few months later, in De­cem­ber, he bought the dis­tressed gold ex­plo­ration com­pany Wit­wa­ter­srand Gold for R400m, while in Novem­ber he’d al­ready been in­volved in a min­er­als swap with neigh­bour, Har­mony Gold.

While not ex­actly mod­est in terms of M& A ac­tiv­ity, Frone­man is about to re­turn to the deal-mak­ing mar­ket with more gusto, es­pe­cially as the de­te­ri­o­ra­tion in SA’s min­ing sec­tor is so chronic that M& A is be­com­ing a busi­ness ne­ces­sity. Sibanye is com­ing to the party; we just need to see who it chooses to take with.

The ex­pec­ta­tion is that one part­ner will be Har­mony Gold which, at about R5bn, is clos­ing in on mid-cap sta­tus af­ter be­ing SA’s largest gold pro­ducer less than a decade ago. Frone­man has spo­ken of gold sec­tor con­sol­i­da­tion where the busi­ness mo­ti­va­tion is cor­po­rate costs. Most of the min­ing costs have al­ready been taken out by ex­ist­ing own­ers, he ar­gues. Buy­ing a com­pany, how­ever, re­moves the du­pli­ca­tion in man­age­rial staff, of­fice costs and the like.

It’s also in­creas­ingly likely Sibanye will close a deal for the Rusten­burg as­sets of An­glo Amer­i­can Plat­inum af­ter ac­knowl­edg­ing at his group’s in­terim re­sults pre­sen­ta­tion ear­lier this month that mar­ket con­di­tions in the plat­inum group met­als in­dus­try had made for more “re­al­is­tic sellers”. For its part, Am­plats has sug­gested it won’t seek to bleed the last dol­lar for its as­sets.

On top of that, there are a num­ber of or­ganic growth prospects in­clud­ing t he so- called West Rand Tail­ings Re­treat­ment Plant ( WRTRP), which are the ‘ dumps’ bought with the 2013 Cooke ac­qui­si­tion.

Ac­cord­ing to Frone­man, Sibanye will pro­duce 1.2m ounces of gold af­ter min­ing a max­i­mum of 30% of the re­sources at the dumps, as well as 35m pounds of ura­nium ox­ide. Based on in­ter­nal com­pany assess­ments, the pro­ject will have a net as­set value of up to R3.6bn in its first phase.

Frone­man won’t, how­ever, dis­close t he cap­i­tal t hat’s re­quired for t he pro­ject. “I don’t want to cre­ate a cap­i­tal over­hang,” he told an­a­lysts, re­fer­ring to the like­li­hood of com­pany val­u­a­tions be­ing de­pressed by the debt or eq­uity

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