Sibanye stalks platinum assets as gold dwindles

Sibanye stalks platinum assets as gold dwindles

SIBANYE Gold is looking for platinum opportunities because of the limited scope of growing its South African portfolio of gold mines with decent assets, says CEO Neal Froneman.

If the platinum venture was successful, the miner could look to other minerals to generate cash and grow its dividend yield.

But Mr Froneman cautioned in an interview that while there was speculation in the market that Sibanye was looking at Anglo American Platinum's (Amplats') Rustenburg mines, that was not necessarily the case. Anglo American CEO Mark Cutifani has indicated that these mines have been earmarked for possible disposal.

Mr Froneman said Sibanye had recently visited a number of platinum companies. "We must be clear - we are not in specific discussions with anybody.

"We have, for probably six months now, been looking intensely at different platinum companies and assets. We have gone through the front doors of these companies and said we want to build a South African precious metal champion."

Mr Froneman declined to name any of the miners, but said: "I'd be very disappointed if by the end of this year we haven't done a material platinum transaction."

An analyst, who declined to be named, said he doubted Amplats would sell its Rustenburg mines.

Mr Cutifani said last week that the labour-intensive, deep-level and technically challenging nature of the Rustenburg mines was forcing a review of the assets. "We should be focusing on the more mechanised operations, which is what I think we do much better, and allow someone who has a better skill set in those types of mines to run those kinds of assets ."

The platinum sector is a tough business, with a wage strike at mines around Rustenburg well into its 12th week, costing producers R13bn in lost revenue and workers about R6bn in wages.

More than half of South Africa's platinum mines are marginal or loss-making because of stagnant metal prices and soaring input costs, particularly labour and power.

Commenting on why the troubled platinum sector appealed to Sibanye, Mr Froneman said that in the past year the company had been able to extract value from its gold mines that had struggled as part of the Gold Fields portfolio.

Sibanye would be able to call on its experience gained in turning around gold mines that had similar geology to the platinum ones he was hoping to acquire.

Asked what Sibanye, which has taken a hard line on labour disruptions at its own mines, would do differently to prevailing platinum mining companies, Mr Froneman said: "We have created a South African champion in Sibanye. It has a lot of political support (and) because of that we have been able to engage with the unions in a more robust way and do the right things."

Sibanye, with its strategy of returning cash to shareholders, would not buy developmental assets that require large amounts of money to bring into production. "Until we get a substantial foothold in platinum it will be very difficult to invest in development companies because it won't underpin our dividend yield," Mr Froneman said.

Sibanye has had an 84% growth in its share price since it listed last February after Gold Fields unbundled three gold mines into a new company.

Gold Fields, on the other hand, has shed 52% in that time.

Sibanye is promising investors strong cash flows and healthy dividend payments. It has a number of other gold projects it will bring into production over the next five years.

Mr Froneman said Sibanye's focus remained on gold mining. But the other local gold miners were unlikely to dispose of core assets and for Sibanye's dividend yield growth it had to look at other commodities.

Platinum is a tabular, hard rock deposit, much like the gold deposits Sibanye is mining at its three mines.

Mr Froneman said Sibanye wanted to assess its ability to mine a mineral apart from gold and its success in platinum would determine if it would look at other minerals.

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