Courting a sceptical market
At Sibanye Gold’s recent year-end results presentation, CEO Neal Froneman tried his best to convince analysts that the Stillwater deal was not a mistake, saying the market ‘has not understood the true value’ of the takeover.
sibanye Gold CEO Neal Froneman could hardly conceal his frustration with the performance of the firm’s share price, which has roughly halved in the past 12 months and is not performing as well as other gold stocks on a relative basis. It currently has the gold and platinum firm valued at R24.2bn.
“Our dividend is bigger than AngloGold [Ashanti],” said Froneman in an interview with finweek, adding that AngloGold’s market cap is currently around R60bn. “I understand we are in a rights issue period where we’ve got an overhang, but post the rights issue, I would expect very significant uptick in our share price.”
The rights issue, in which some $1.3bn (R16.3bn) will be raised, is to pay for the firm’s takeover of Stillwater, a large US-based platinum and palladium firm, which Froneman said ought to win shareholder approval around April. Sibanye had also taken the effort of briefing several of its shareholders about the deal, including the Public Investment Corporation, and found them to be supportive.
The view of analysts is that Stillwater is such a gamechanger that it’s hard to get visibility of Sibanye until the dust has settled.
The strategic plan
Yet Froneman still used a considerable part of the firm’s year-end results presentation at the end of February to go through the basics of the deal as if to court favour of his strategic plan with the market. “The market has not understood the true value of Stillwater,” he said. “This is a low-cost producer which will establish us as one of the top three platinum and palladium producers in the lowest cost quartile,” he said.
The criticism of analysts, though, is that Sibanye didn’t turn to further consolidation in the SA platinum sector first, choosing instead to focus its attention on Montana where Stillwater is located. “We know
“Post the rights issue, I would expect very significant uptick in our share price.”
CEO of Sibanye Gold Stillwater doesn’t have synergies in that way,” replied Froneman. “That’s not the deal we wanted to do.” In any event, Sibanye is purporting to already have a fourth deal lined up in the platinum sector, which will make it a mine-to-market integrated platinum group metal producer, the details of which Froneman was reluctant to discuss. “What’s the fourth deal?” an analyst asked. “I can’t tell you what I was referring to, but we’ve got a fourth step in the strategy,” he said. “Once the balance sheet is in position there is a fourth step that will take us from mine to market in SA. Will it happen in two or even nine months? I don’t know,” he said, adding that were this deal to be consummated, Sibanye would be constrained to do any more platinum deals owing to “competition issues”. The first two steps in the strategy were the purchase of Rustenburg Platinum Mines from Anglo American Platinum for about R4.5bn base case and the R4bn capture of Aquarius Platinum.
Not convinced on Stillwater
The view of analysts is that Stillwater is such a gamechanger that it’s hard to get visibility of Sibanye until the dust has settled. The rights issue is expected to take place in the third quarter. At the same time, there’s questions of how Sibanye will tackle its capital expenditure challenges given a decline in the rand gold