Sibanye Mulls Move Into Base Metals, Overseas on Stock Surge

  • Miner share jump this year provides currency for acquisitions
  • CEO Neal Froneman says no change in dividend-focused strategy

Sibanye Gold Ltd.’s share-price rally this year provides the company with the opportunity to look for acquisitions in base metals and outside its home country of South Africa, Chief Executive Officer Neal Froneman said.

The stock is up 53 percent this year and hit a record intraday high on Jan. 28, with the miner benefiting from a weak rand curbing costs at a time when a plunge in international commodity prices is prompting companies elsewhere to put assets up for sale.

“With our share price having rallied as hard as it has, we now have a currency that we can look a little bit further than just South Africa,” Froneman said by phone Monday. “Because of the state of the commodity sector, there’s a lot of opportunity to make entries now through the entire commodity range at very attractive prices. Base metals are giving you those opportunities now.”

Sibanye, the biggest producer of gold in South Africa, has surged this year as the rand’s near 10 percent plunge against the dollar since Dec. 1 has increased its profit margins. The company gets its revenue in dollars while its costs are in the local currency.

Costs Decline

The company’s all-in sustaining costs were about 400,000 rand a kilogram (2.2 pounds) in the fourth quarter, about 5 percent lower than the previous three months, it said in a statement Monday. With the help of the declining rand, dollar-denominated costs dropped about 14 percent to $907 an ounce. Production was “marginally higher” at 411,500 ounces.

The company’s stock climbed 0.2 percent to 35.07 rand a share by 2:04 p.m. in Johannesburg. It reached a record intraday high of 38.29 rand on Jan. 28.

Froneman, who has been CEO since Sibanye was spun out of Gold Fields Ltd. in 2013, said the potential acquisitions would be in addition to the purchases of Aquarius Platinum Ltd. and three Anglo American Platinum Ltd. mines, which were agreed last year and are currently awaiting regulatory approvals.

“Our relative valuation compared to the valuations that are given to assets outside of South Africa has always been a problem in that we’ve never had sufficient premium in our share price to do that,” he said, referring to acquisitions. “Now we’re able to start looking.”

Any purchases would have to be at the right price and in keeping with Sibanye’s strategy of increasing its dividend and sustaining the payout into the long term, Froneman said.

Sibanye will produce about 1.61 million ounces of gold this year, up from about 1.54 million ounces in 2015, it said. All-in sustaining costs will be about 425,000 rand a kilogram, or $880 an ounce.

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