BUSINESS MAVERICK INTERVIEW

Sibanye’s Froneman says no M&A until debt cut and dividend revived

By Ed Stoddard 14 May 2020
Caption
Neal Froneman, CEO of Sibanye-Stillwater. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

Neal Froneman, the CEO of diversified precious-metals producer Sibanye-Stillwater, is in no hurry to acquire new assets. Amid the Covid-19 pandemic, the company is focusing on deleveraging, which means paying down debt and bringing back a dividend.

Ed Stoddard

In late February, Bloomberg TV quoted Sibanye-Stillwater (Sibanye) CEO Neal Froneman as saying that he was looking to acquire a North American gold producer in the next six to nine months, and was willing to spend as much as $5-billion on such an acquisition.

That is no longer on the 2020 cards and Froneman said there was some fine print that was not relayed forcefully at the time.

“What they forgot to mention when they put that sort of headline up is that our primary focus is deleveraging and reinstating our dividend and before we do any M&A those are necessary prerequisites,” Froneman told Business Maverick in an online interview. Froneman is currently marooned in the US. 

“At that time the gold price wasn’t $1,700 an ounce, the gold price now is at significant highs, and it wouldn’t be smart or counter-cyclical to buy assets at these sort of prices. When you put all that together, we have not deleveraged to the level we want, we have not reinstated our dividend… That (a big gold acquisition) is not one of our focus issues,” he said. Gold’s price has gained around 13% to more than $1,700 an ounce so far in 2020, with the pandemic’s impact on economies and financial markets boosting the precious metal’s “safe-haven status” among investors. 

The company turned off its dividend stream in 2018 after falling into a loss because of impairments and a provision that was part of the historic settlement for silicosis sufferers who worked in South Africa’s gold mines. It had been an investor darling in part because of its rich dividends as the Gold Fields’ spin-off generated cash from mature gold assets that did not require vast amounts of capital. It has since diversified into platinum group metals (PGMs), including a palladium mine in the US, and is looking at making a move into the battery metals space that is being powered by electric vehicles.

“The battery metals strategy is not finished, we are still doing the research on that. It is not a primary focus. I would estimate that possibly some time next year might make sense. But it will also be post deleveraging and post reinstating our dividend and having a global economy that is moving in the right direction,” Froneman said. 

“What we are trying to understand is what the recovery will look like. Will it be V-shaped like in China or is it going to be U-shaped or L-shaped, and we think Europe and North America will behave very differently. So those are the sorts of things that we need a bit of clarity on. But if you look out three or four years I think it is always what we were forecasting.” 

Covid-19 issues have been taking up “99%” of his time, Froneman said, underscoring the pandemic’s ubiquitous grip on day-to-day operational issues and decisions. 

Sibanye had been one of the parties interested in AngloGold Ashanti’s Mponeng operation, the world’s deepest gold mine that Harmony Gold is now set to acquire. Froneman said there was nothing else in South Africa that was remotely on Sibanye’s radar screen now.

“If you are talking external growth in South Africa, there is nothing really that is relevant. If you are talking about organic growth, that is different. With our current portfolio, we have a huge resource and there are a lot of projects which can extend the life of our mines and grow output under the right conditions. So what we are not doing is leaving South Africa. We desperately need to see South Africa’s fortunes improve. If South Africa prospers we will prosper. But in terms of external growth, it only makes sense to look internationally.”

And building up a global portfolio of assets could also lead to a move in Sibanye’s primary listing from Johannesburg, but that is also not going to happen anytime soon. 

“Long before we move it we need to build up a portfolio of assets that is representative of an international company. There is little to be gained by changing your listing if you have primarily South African assets.” BM

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