Johannesburg - Sibanye Gold, already among the best-performing stocks in its business, is buying into the embattled platinum industry with deals that’ll take it from a standing start to a top-three producer.
The biggest miner of South African gold offered on Tuesday to buy Aquarius Platinum for $294 million, after agreeing to buy some of Anglo American Platinum’s ageing mines in the country on September 9. The two deals, with a combined value of at least $625 million, will shake up an industry that has been dominated by the same four companies for decades.
The purchases will take Sibanye’s platinum output from zero to about 700 000 ounces a year, or more than a million including related metals such as palladium. Its platinum output will be third in the world after Anglo American and Impala Platinum. Lonmin, now No. 3, has already laid out plans to cut production to about 650 000 ounces.
“If we don’t do anything other than this, this is a very good entry point,” Sibanye’s Chief Executive Officer Neal Froneman said in an interview Tuesday. “To be both a million ounce-plus producer in both gold and platinum group metals is a very significant position.”
Froneman is grabbing the chance to enter platinum mining as the price of the metal has fallen to near a six-year low, forcing other miners to close shafts, cut jobs and halt projects. The deals also allow Sibanye to diversify into a metal - used in autocatalysts to filter out exhaust fumes from cars - that benefits from global economic growth. That will support long-term cash flows and support shareholders’ dividends, the company says.
Sibanye is the best performer in the past two years in a Bloomberg Intelligence gauge tracking 15 of the top gold miners, rising 53 percent as the BI measure fell 39 percent.
Sibanye has the cash and loans to improve assets and cut costs while expanding operations, said Richard Hart, an analyst at Arqaam Capital in Johannesburg.
“They’re the only people to have the tools to shake up the industry,” he said. “Everybody knew the platinum industry was going to change but they didn’t know how. This is obviously how.”
BLOOMBERG