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Tuesday, June 28, 2022

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Sibanye’s Froneman believes share is undervalued

SIBANYE Stillwater chief executive Neal Froneman still believes the company is undervalued given its strong cashflow position and record dividend declaration for the second half year period to the end of December. | File photo Bloomberg

SIBANYE Stillwater chief executive Neal Froneman still believes the company is undervalued given its strong cashflow position and record dividend declaration for the second half year period to the end of December. | File photo Bloomberg

Published Mar 4, 2022

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DESPITE a 52 percent year to date strengthening of its share price, Sibanye Stillwater chief executive Neal Froneman still believes the company is undervalued given its strong cash flow position and record dividend declaration for the second half-year period to the end of December.

Sibanye operates across precious metals such as gold, platinum as well as nickel and zinc in key markets such as South Africa, the US, Finland and Brazil.

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Its shares traded 0.99 percent weaker at R7.46 on the JSE in afternoon trade yesterday, largely in line with other resource groups such as Impala Platinum and AngloGold Ashanti that traded 1.59 percent and 1.89 percent weaker, respectively.

Froneman said during a conference call yesterday after the release of the company’s second-half financials for the period to the end of December that the company’s share price surge could be used as currency for Sibanye to fund mergers and acquisitions.

“We acknowledge the increase in the share price, but I believe we are still undervalued, and there is more upside potential in the share price. So in terms of using it as currency, I think where the share price is higher and at a premium than the target (for merger), then it can be used as currency,” Froneman said.

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Attributable profit for the period under review strengthened by 13 percent to R33.1 billion, with headline earnings coming in stronger by 27 percent at R36.9bn, leading to a final dividend of R5.3bn, or roughly 187 cents per share, at a full-year dividend yield of 9.8 percent.

This followed a 19 percent increase in net cash flow from operating activities, which amounted to R32.3bn and adjusted free cash flows of R37.4bn, which were 88 percent stronger compared to the previous contrasting period.

The stronger financial performance was on the back of robust revenue flows, which grew more than 30 percent to R172.2bn with a strong operating performance from the South African platinum group metals (PGM) and gold operations.

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“The operating performance from the SA PGM operations for 2021 was particularly strong, with production of 1 836138 ounces (oz) above the upper end of the guided range for 2021. Gold production of 27 747kg (892087oz) from the SA gold operations (excluding DRDGold) for 2021 was within annual guidance with production of 14 348kg,” the company said.

Sibanye is facing labour unrest for its gold operations, with 62 percent of mineworkers for its gold after wage negotiations reached a stalemate. Mineworkers from the National Union of Mineworkers (NUM) and the United Association of South Africa participated in the ballot process.

“Workers' patience has been tested by the ruthless Sibanye-Stillwater, and it's now time to feel the heat,” NUM said.

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However, Froneman and Sibanye appeared unfazed by the decision by mineworkers to strike over wages.

Froneman said during the conference call to present the company’s financials that Sibanye was not changing its offer to the mineworkers from its gold mines.

“We will not be changing the offer; we are not raising the offer,” he said.

The company is also facing steep labour costs at Stillwater in the US, with Froneman saying this could affect expansion plans.

He said: “If there's a shortage of capacity to fill those positions, there's no point in driving up your cost and extracting the resource in a sub-optimal way,” a situation that is poised to force a change in strategy towards “working with labour that we have got”.

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