Sibanye’s share price move confounds Gold Fields critics
SIBANYE Gold shares rose 5% on the JSE yesterday, reaching R13.70, which puts the stock within spitting distance of where it started trading at about R14 on February 11 when it was split off from Gold Fields.
The stock has far outperformed that of its former parent. Gold Fields has slumped from about R93 on February 11 to R47.62 yesterday, just above its 12month low of R45.60.
Sibanye said yesterday that New York-based investment firm Van Eck Associates had raised its stake from 4.75%. Van Eck now owned 5.97% of the total issued ordinary shares in Sibanye.
Sibanye shares also tumbled in the wake of the separation and the slump in the gold market from April, hitting a low of R6.59 in July, but they have staged a sharp recovery from levels of about R8 at the beginning of August.
This was not the outcome expected when Gold Fields separated all its South African mines bar South Deep from its international operations and listed them separately as Sibanye, which now owns the Driefontein, Kloof and Beatrix mines.
Gold Fields retained South Deep in addition to its overseas mines in Ghana, South America and Australia, and its various exploration projects.
Gold Fields has subsequently increased its exposure to Australia, buying another three mines there during August for $300m (about R3bn).
The separation was supposed to bring about a higher rating for Gold Fields stock by getting rid of the so-called “South African discount” on the shares that flowed from negative investor sentiment regarding mining companies operating in the country.
Analysts had been calling for such a split for years, but the irony of the situation is that Gold Fields’ former South African business has been rated more highly than the foreign operations.
To add insult to injury, the much-vaunted South Deep operation, which Gold Fields opted to retain, continues to underperform.
Making a presentation to this week’s Denver Gold Forum — an annual conference in Denver, Colorado — Sibanye CEO Neal Froneman pointed out that Sibanye’s declared maiden dividend of 37c a share put Sibanye on an annualised yield of 7%, “which is the highest in the industry”.
According to JP Morgan Cazenove analysts Steve Shepherd and Allan Cooke, Mr Froneman also committed Sibanye to “setting the benchmark dividend yield for the sector”.
The analysts said: “On a peerrelative basis, Sibanye Gold is the cheapest gold share bar none on most earnings and valuation metrics. The stock remains a stand-out gold share pick for us.
“The group sports estimated all-in costs of around $1,100/oz —larger peers are struggling to reach this number.”