Gold Bargains Gone as Sibanye Sees Few Chances for a Deal

  • ‘Very limited opportunities’ for an acquisition, CEO says
  • Bloomberg gauge of biggest gold companies up 144% in 2016

The gold market shot up so fast that opportunities to make a big acquisition are now scarce, according to Sibanye Gold Ltd.

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 Chief Executive Officer Neal Froneman. He is no longer considering acquiring Acacia Mining Plc or Barrick Gold Corp.’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 U.S. 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 Ltd. in 2013. In May, he said he was optimistic about a deal, but acknowledged that the rally was creating “challenging valuations.”

Brexit Boost

After U.K. 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.”

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 10 billion rand of free cash flow this year.

(Adds gold price under Brexit Boost subhead. An earlier version of this story corrected the spelling of the company’s name in the headline.)
Before it's here, it's on the Bloomberg Terminal.