Sibanye says it can raise $1bn for platinum foray

While the dust of South Africa’s five-month platinum strike may hang in the air for a long time to come, it is clear enough to see that the shutdown probably presents the best opportunity for mining turnaround specialist Neal Froneman to at last apply in platinum what he has done so successfully in gold – acquire an ailing asset at a knocked down price and return it to productivity and profit the Sibanye Gold way. With US$1-billion in funding readily accessible, and a choice of marginal operations to shop for in Rustenburg, Sibanye may well have a platinum card in its pocket by year-end. GK

By Ed Stoddard

WESTONARIA South Africa, July 5, (Reuters) – South Africa’s Sibanye Gold has been in talks with almost all of the major platinum producers in its quest to buy an asset in the sector this year and can easily raise the money to fund such a deal, its chief executive said on Friday.

 

“We have been through the front doors of just about all the significant platinum companies,” Neal Froneman told Reuters in an interview at Sibanye’s headquarters in the gold mining town of Westonaria about 40 kilometres (25 miles) west of Johannesburg.

 

Sibanye, a spin-off from Gold Fields whose main assets are deep-level bullion mines in South Africa, said earlier this year it planned to make an acquisition in platinum, a sector set for a shake-up following a five-month strike that ended last week.

 

Top producer Anglo American Platinum said this week it was “reviewing options” for its Rustenburg operations that were hit by the strike and parent Anglo American has signalled its readiness to divest.

“We are looking at all platinum assets including what Anglo Platinum may sell,” Froneman said, reiterating that he wanted to do a deal this year. He would not be drawn on who else besides Amplats was flagging platinum assets.

 

Sibanye’s management team has a reputation for squeezing profit out of mines nearing the end of their lives and it could potentially fund the purchase by tapping cheap Chinese sources of finance given its connection to investors from the country.

 

Froneman formerly ran Gold One where he oversaw its acquisition by a Chinese consortium. Sibanye itself acquired Gold One’s Cooke operations in an all-share deal that saw it issue new shares worth 17 percent of its total stock to the Chinese group known as the BCX Consortium.

 

Chinese investors open up avenues to cheaper rates of finance than South African companies can normally get, for example through the Chinese Development Bank, but Froneman said he had plenty of options.

 

Asked if he could raise, say, $1 billion for a platinum deal, he said he could do so “at the drop of a hat”.

But he added that he did not think that any of the assets Sibanye was looking at “are anywhere near” $1 billion.

 

Analysts have said the five Rustenburg mines plus its Union mine that Amplats may put on the block could be worth between $1 billion and $2 billion.

 

“Since we have made our intention public, all the major investment banks have provided us with funding proposals. And in addition we have the support of our shareholders and in particular the Chinese,” he said.

 

“We generate a lot of free cash ourselves. So it could well be a combination of equity, debt and other instruments. But the bottom line is that everything that is possibly doable in the sector can be financed by ourselves.”

 

LABOUR TENSIONS

 

South Africa accounts for about 70 percent of global platinum production but the sector faces challenges. The recent strike cost Amplats and rivals Impala Platinum and Lonmin over $2 billion in lost revenue.

 

Labour tensions remain raw and restructuring, including job cuts, is widely expected. But Froneman said restructuring was not just about costs.”We have a view that it is more about growing output than it is about cutting costs,” he said.

 

Froneman, a stocky and blunt-talking wheeler and dealer with a passion for big game hunting, also dismissed concerns raised by some critics that gold and platinum could not easily fit in the same portfolio because the latter needs to be marketed to specific clients.

Platinum is mostly used for emissions-capping catalytic converters in automobiles as well as in jewelry.

“The gold sector is unique in that whatever you produce you sell. There are other parts of our business where we are involved in marketing our product, like uranium. Those skills you can acquire,” he said.

He also said any platinum acquisition would be done with an eye to enhancing Sibanye’s ability to pay dividends.

 

The company’s dividend yield is currently 4 percent, considerably higher than the 2.9 percent average for South Africa’s All-share index.