Sibanye expects the market to warm to its shares after record profits

CEO Neal Froneman believes the miner’s valuation is ready for a rerating

Sibanye-Stillwater CEO Neal Froneman is disappointed in the market valuation of the business, which he believes to be ready for a rerating after delivering industry-leading dividends and record profits in the first half of the year.

The group on Thursday reported that interim profits had more than doubled to R25.32bn, compared with R9.73bn in the first half of 2020, as metal prices and production numbers soared at the SA operations.

This led the board to declare an interim dividend of R8.54bn, or R2.92 a share, the top dividend in the mining industry.

The share price is seen by many market observers as trading cheaply and on Thursday it closed 1.36% lower at R57.92.

Froneman said that with Sibanye having come out of a high-leveraged period, it would take some time for the market to warm to it. The market would want to see several quarters of consistent delivery and a track record of dividends.

He said the ultra-deep gold mining business was a drag on the share, while Sibanye’s entrepreneurial nature also created some overhang but was an important way for the group to add value.

“I think we will demonstrate industry-leading dividends and share buybacks, and we will make smart acquisitions ... those are all things that impact value, but I also believe [the valuation will correct] if we just keep on doing the right things, which we are doing.”

While the fundamentals for platinum group metals (PGMs) remain strong, the group intends to continue creating shareholder value by securing its role in a greener future through advancing green metals into its portfolio. The group has already announced an investment agreement with the Keliber lithium project in Finland and plans to acquire the Sandouville nickel refinery in France.

Sibanye continues to shop around, believing there are “a few opportunities” available in the space of battery metals that could build into the group’s green metals strategy.

The green metals business will be underpinned by Sibanye’s exposure to PGMs. They are used to lower emissions in vehicles and in future are expected to play a key role in the hydrogen economy.

Sibanye has also set up a dedicated business unit for its metals recycling business. While its tailings retreatment business, which is held through its majority stake in DRDGold, only processes gold, Froneman said there was no reason this could not be rolled out into a range of other commodities.

The group is also putting a strategy in place to develop its uranium assets in anticipation of nuclear power playing a major role in global energy due to it emitting no carbon.

The new assets are unlikely to be in SA. When asked about the riots and looting that engulfed parts of SA in July,

Froneman said the events of the past few weeks together with the local operating environment made a decision to diversify out of SA easier.

Sibanye, which paid R10.3bn in taxes and royalties in the first half of 2021, was largely unaffected by the riots but it did accelerate a loss of confidence in the government to do the right things, Froneman said.

“At times we see what looks like good reform coming through, but it is not backed up with actions that really are tangible and underpin those reforms,” he said, noting that the government does now appear to be listening more than ever before.

“But I wouldn’t be overly confident that there’s a dramatic change about to happen,” Froneman said. “But we will look after ourselves and we will ensure that we can operate under these conditions and in this environment, which just makes it so much easier to move to other stable jurisdictions in the rest of the world.”