[miningmx.com] – At R13.05/share, the opening price of Sibanye Gold at its JSE listing today, the company is worth about 37% of Harmony Gold, the company Sibanye Gold exceeds in production by about 100,000 oz/year.
That would seem to support Gold Fields’ CEO Nick Holland’s contention that production for the sake of production, size for the sake of size, is no argument in the modern gold market. Battered by the effects of recession and faced with more economic uncertainty, investors want yield; cash in their pockets.
While Harmony benefits from the promise of its 50% stake in the enormous Papua New Guinea prospect, Wafi/Golpu, Gold Fields and its progeny, Sibanye Gold, will have to deliver real results. Do they have a chance?
The biggest threat to Sibanye’s success will be labour discontent. Sibanye managers, speaking informally at the listing ceremony, said a planned march by 10,000 Cosatu members against the formation of Sibanye Gold at the weekend resulted in relatively paltry turnout of 1,000 protestors, of which half were marshalls.
The Sibanye guys felt labour on their mines – Driefontein, Kloof and Beatrix – was tired of strike action; they were also indebted (like Sibanye, and eager to push on).
There’s also a feeling that the violent and disruptive turf war between the National Union of Mineworkers (NUM) and the Associated Mineworkers and Construction Union (Amcu) had coalesced into a more settled redistribution of union power.
Driefontein’s labour comprised 50% of Amcu-aligned members, they said. Kloof and Beatrix, situated farther from Amcu’s stronghold in Carletonville, were strongly NUM aligned.
If this is the case, if the coast is clear for Sibanye to focus on the technical challenges of mining more efficiently, then there’s a good chance Sibanye’s share price performance in a year’s time will make a mockery of its somewhat stunted opening.
“Overall, we would have liked to open higher,’ said James Wellsted, investor relations manager for Sibanye Gold.
He also thinks there’s some confusion and hesitancy in the stock as the shares in Sibanye aren’t available yet, and won’t be until next week. This has excluded the hedge funds from the market, he says. Time will tell.
Sibanye Gold is the third time Neal Froneman, the gold firm’s CEO, has blown the famous kudu horn at the JSE, signalling opening of a newly listed firm (Gold One International and Goliath Gold were the others; Uranium One was a name change from the already listed Aflease). It could be his best yet.
Froneman has, until now, mostly been a start-up and exploration player. Sibanye Gold returns him to his roots at Harmony where he helped Bernard Swanepoel nip back costs and hope the rand gold price played ball, which it did.
One hears Sibanye Gold was also largely a function of Froneman’s pestering. He wanted to buy Beatrix knowing that it could dovetail perfectly with the aims of Gold One International. So this is Froneman’s best platform yet. At R13/share, Sibanye may be a fantastic bargain.
