Johannesburg - The gold market shot up so fast that opportunities to make a big acquisition are now scarce, according to Sibanye Gold.
The South African miner said just two months ago that it wanted to buy a gold-producing asset this year. Now, those doors have closed, according to CEO Neal Froneman. He is no longer considering acquiring Acacia Mining or Barrick Gold’s stake in the company.
“That was pre-Brexit. What Brexit did was make it very difficult to find value,” said Froneman in an interview with Bloomberg News. “Where there was an opportunity to pay industry norms, that’s now gone.”
Gold-mining stocks are in the midst of the biggest rally in decades on the back of higher bullion prices, easy monetary policy and events like the US presidential election and Brexit driving demand for havens. A Bloomberg gauge of the biggest gold companies rallied 144 percent in 2016.
Froneman was on the lookout for purchases after turning around three aging gold mines in South Africa’s Witwatersrand Basin following Sibanye’s spinoff from Gold Fields in 2013. In May, he said he was optimistic about a deal, but acknowledged that the rally was creating “challenging valuations.”
Brexit boost
After UK citizens decided to leave the European Union on June 23, gold prices ratcheted higher. The Bloomberg index of 14 gold miners is up 19 percent since the day before the vote. Gold for immediate delivery was little changed today at $1 334.60 an ounce.
“There’s probably going to be very limited opportunities,” he said. “We are not desperate to grow our gold or platinum business.”
Read also: Pay cuts needed in mining - Sibanye
Sibanye has also benefited from the rally. The shares are at a record after more than doubling in 2016. The twin boost of higher gold prices and a weaker rand, in which it pays costs, have helped widen profit margins and turn the producer’s aging, previously high-cost operations into mines that are on course to generate R10 billion of free cash flow this year.
BLOOMBERG