Sibanye Gold had been in talks with almost all of the major platinum producers in its quest to buy an asset in the sector this year and could 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 said.
Sibanye, a spin-off from Gold Fields whose main assets are deep-level bullion mines in South Africa, said earlier this year that it planned to make an acquisition in platinum, a sector set for a shake-up following a five-month strike that ended two weeks ago.
Top producer Anglo American Platinum (Amplats) said last 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 asset sales.
Sibanye’s management team has a reputation for squeezing profit out of mines nearing the end of their lives and it could well 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 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 BCX Consortium, a Chinese group.
Asked if he could raise, say, $1 billion (R10.8bn) for a deal, he said “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” R10bn.
Analysts have said the five Rustenburg mines and Union mine that Amplats might put on the block could be worth between $1bn and $2bn.
“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. 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.”
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 R22bn 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.”
Froneman, a blunt-talking wheeler and dealer with a passion for big game hunting, dismissed concerns raised by some critics that gold and platinum could not easily fit in the same portfolio because the latter needed to be marketed to specific clients.
“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 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 4 percent. – Reuters