Sibanye Gold, already among the best-performing stocks in its business, is buying into the embattled platinum industry with deals that will take it from a standing start to a top-three producer.
The biggest miner of South African gold this week offered to purchase Aquarius Platinum for $294-million, after agreeing to buy some of Anglo American Platinum’s ageing mines in the country last month. The two deals, together worth 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 ounces including related metals such as palladium. Its platinum production will be third in the world after Anglo American and Impala Platinum Holdings. Lonmin, now at number three, 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,” said Sibanye chief executive Neal Froneman. “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 a near 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 vehicle catalysts to filter out exhaust fumes from cars) that benefits from global economic growth. That will support long-term cash flows and 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 51% as the gauge measure fell 39%.
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 News