Creating the Springbok team of the gold world – Neal Froneman on his Sibanye, AngloGold, Gold Fields merger idea

What’s next for Sibanye-Stillwater? In this interview with BizNews editor-at-large Jackie Cameron, Sibanye-Stillwater CEO Neal Froneman shares his views on a potential merger of Sibanye-Stillwater, AngloGold Ashanti and Gold Fields. He outlines his investment thesis and proposes that a South African gold mining titan will be in the best interests of this country. After timing the precious metals Stillwater deal to perfection, it will take a brave man to bet against one of South Africas best capital allocators. – Justin Rowe-Roberts

Sibanye-Stillwater CEO Neal Froneman on the benefits of a proposed merger of Sibanye-Stillwater, AngloGold Ashanti and Gold Fields for shareholders:

The context for our comments were really around our results presentation where we had an analyst asking about our entry into battery metals and our intention to grow in the gold space. And both of those initiatives are really driven by the fact that at a thirteen and a half billion dollars of market capitalisation, Sibanye-Stillwater is still not relevant in the in the bigger investment space.

Well you know, the other companies that you (AngloGold Ashanti and Gold Fields) referred to are just part of a universal gold company that is 60 per cent and 40 per cent smaller than ourselves. And if we are not relevant, they are not relevant. And we are all going to either get consolidated internationally or we can do the consolidating. Now, the real the real benefit for shareholders and it’s not and it’s not an issue of just size. It’s that bigger companies trade at higher multiples.

Whether there’ve been any discussions with the boards of target companies: 

We we talk to many different gold companies. We go through the front door of all of them. And, you know, over a period of time, we’ve spoken to many. And, there’s there’s pros and cons of looking at North American gold producers. There’s pros and cons of looking at South African gold producers. So we continue to look. But I can assure you, when we make a move, it will be value accretive. It will make sense to to all shareholders. And I think the investment community knows us for doing smart deals. Both groups of shareholders have to benefit and that’s what we’re good at. So that’ll be the outcome.

On why a South African gold mining titan would be in the best interests of the country:

When I go to international industry meetings, we don’t even feature as South Africa. It’s about time we as South Africans did as the Springboks do and win the game of business wherever we play all over the world – that’s in the best interest of South Africa. I think there is real merit in that as well.

On financing a deal of this magnitude:

We have significant access to cash from from our own business. We have an equity now that is trading at better multiples than certainly the South African producers. But I think we we jumping the gun, assuming that this is going to happen. As I’ve said, this is part of the universe of gold companies we look at. And every transaction we’ve done is structured in a way that is smart. Well, let me tell you what we won’t do irrespective of the target. We will not take on excessive amounts of debt. We will not conduct or use our equity if its dilutive. So that’s what we won’t do. What we will do is a combination of things to get a transaction done. So just then, it’s easier to tell you what we won’t do than what we will do, because it depends very much on the target date.

On his bullishness behind the gold price:

We’ve always been bullish about gold. We tried to to move quickly before before Covid-19 early last year. But we could not close the transaction we were trying to close. That was on the basis that we could we could see gold going up as it’s at risk diversification commodity for an investor. I think that the combination of PGMs and gold are countercyclical. So in other words, while there’s economic prosperity, our industrial side of our business being the PGMs and battery metals will do well. But we all know and and I just heard in your news cast that there are question marks about around vaccines. There could well be third waves in the rest of the world and then gold will feature. That’s the one thing. I think the second thing is that where you had enormous stimulus packages like we’re seeing now, it takes about three or four years and and and gold will generally react in those situations as well.

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