Mining guru Peter Major casts doubt over Sibanye-Stillwater’s ‘green’ metals acquisition

Mining guru Peter Major dissects Sibanye-Stillwater’s $1bn acquisition of the Santa Rita nickel mine and Serrote copper mine in Brazil. The acquisition, which is an inflection point in terms of Sibanye’s direction going forward, is aimed at targeting metals that will play an influential role in the ‘green’ economy of the future. Renowned deal-maker and Sibanye CEO, Neal Froneman, previously made his intentions clear on BizNews – and Tuesday’s shareholder conference call – that ‘green’ metals are commodities that will bear fruit for the diversified miner in the years to come. Major, however, has a different view. He’s concerned the ESG (environment, social and governance) mania has possibly pushed these metals to above fair value, suggesting Froneman may be overpaying for these assets. A similar theme played out at the end of the previous commodity boom, where miners were bullish on M&A activity, only to be left in the dust when the frenzy settled. – Justin Rowe-Roberts

Peter Major on Sibanye potentially overpaying for these assets:

I’m definitely concerned about that. A lot of people are. I remember talking to Cynthia Carroll (ex-Anglo America CEO) around 2007, early 2008. She was telling me the fantastic prices they were getting for selling what they called second- and third-tier assets. Anglo never had third-tier assets but was selling some small assets – like railroads and infrastructure – they were selling isolated assets for fantastic prices. She was quoting some of the coal mines they were selling, real orphans stranded at three times what they’d paid for them three, four, five years ago. I said, “I know that’s great news, Cynthia, but you have to realise the same applies to the assets you’re buying. You’re also buying assets for three and four times the price somebody paid for them a few years ago.” It’s like you’re switching your money from the crap table to the slot machine or the roulette table. We’re all concerned. A billion dollars is a lot of money.

On Neal Froneman trying to double the size of the business before retirement: 

You’ve got to clarify that statement. We’ve seen lots of presentations. Where are these mining houses or mining companies? They will show you their market cap or their net asset value compared to five or 10 years ago [and will] say it was $1bn and today it’s $5 billion. So, they’re shining their badges and their faces are beaming to the cameras and the public. I’ve grown this company five-fold in five years, but you might see the share price has gone down 50%. You know, it went from a buck to 50 cents. Yes, it’s not about growing the size of the company as much as growing the size of the share price. And you would like the shares to stay constant and go up two-fold or three-fold rather than staying where it’s at, and the company goes up two- and three-fold by the creation of new shares.

On whether he expects more M&A activity within the mining space: 

Not so much because the metal prices have come off but because time wears everybody out. The strongest man will get worn out by time. If you keep making money at high metal prices month after month, quarter after quarter, year after year, that money accumulates. Eventually, you’re going to crack. Eventually, you’re going to say: I want to spend some of this money myself. I don’t want to just give it back to shareholders. I want to spend some. We’re starting to wonder, does this super cycle have more legs? It has been going on for more than 15 years now. Without a doubt, this is the longest super cycle metal prices have ever experienced.

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