Johannesburg - The
mastermind behind the biggest overseas acquisition by a South African mining
company for 15 years promises more to come.
“There must be
more expansion,” Sibanye Gold CEO Neal Froneman, 56, said in an interview.
“You can never get complacent and sit on your hands.”
That’s after
Froneman agreed to pay $2.2 billion for Montana’s Stillwater Mining, and what
he calls the world’s highest-grade platinum group metals deposit. It’s a step
up for Sibanye, created just three years ago as a spinoff of Gold Fields’s
South African gold mines. The miner previously agreed a $294 million deal for
Aquarius Platinum and to pay a total of between $330 million and $1.45 billion
for three Anglo American Platinum operations.
Read also: Sibanye plunges on R30bn US deal
If approved by
shareholders, the latest deal will be funded with $2.7 billion of borrowings,
compared with a market value for Sibanye on Friday of about $1.6 billion, and
drive its debt-to-earnings ratio up fourfold in the near term before it falls
back later.
The company’s
stock sank a record 15 percent on Friday after announcing the transaction,
also financed through a share sale of at least $750 million. Sibanye rebounded
2.4 percent as of 11:18 a.m. Monday in Johannesburg.
“Deals run in
his blood,” said Bruce Williamson, a Johannesburg-based fund manager at
Integral Asset Management, who’s previously invested in the CEO’s companies.
“He’s moved away from smaller acquisitions now. Stillwater in the US is the big
league.”
Mr Fixit
Not all of
Froneman’s deals have been a success. As CEO of Aflease Gold in 2005, he spun
off SXR Uranium One in a merger with a Canadian company but three years later,
he resigned after prices collapsed and production stalled.
Known as Mr.
Fixit for his turnaround expertise in South Africa’s strike-prone, aging and
dangerous gold mines, the head of Sibanye says his goal in the longer term is
to be able to pay an “industry-leading” dividend to shareholders.
Read also: Sibanye's platinum boss quits after seven months
Stillwater gives
Sibanye greater exposure to palladium and platinum, cuts reliance on South
Africa and extends the life of its reserves. Gold currently funds Sibanye’s
dividends, but production will fall by more than half by 2030 as South African
mines are depleted, and ore becomes deeper and costlier to mine. The US deal
underpins long-term dividends, Froneman said.
“We’d like to
grow our gold business more; being number 10 in the world is not good enough,”
he said, adding that the company needs to take “another step” in South Africa.
“But we’ll only do it if it can create value.”