[miningmx.com] – SIBANYE Gold’s debut year makes a strong case for the benefits of regional consolidation and the focus that brings to a management team.
From a share price perspective alone, Sibanye Gold has doubled in value since January, and registered a 76% return on a 12-month basis.
Compare this to Gold Fields, the company that created Sibanye Gold in 2012 following the de-merger of its west Rand and Free State gold assets. Gold Fields’ share price is 44% lower on a 12-month basis.
It also suffers by comparison on other metrics, too. Net debt, for instance, increased to R17.9bn in the fourth quarter from R16.3bn in the third quarter.
Neal Froneman, CEO of Sibanye Gold, has taken net debt down to R498m from R3.9bn at the company’s creation in February 2013. The aim is to have no debt at all with the focus falling squarely on cash returns, and project development.
Sibanye’s strategy is also to pay up to 35% of normalised earnings. Gold Fields has a similar policy, but on the evidence of its net debt, it is doing so courtesy of the bank.
AngloGold Ashanti passed the dividend despite reducing cash outflow which was $80m in the fourth quarter compared to a $705m outflow in the previous three quarters. Its CEO, Srinivasan Venkatakrishnan, said it didn’t seem wise to borrow from banks to pay a dividend. The company will, however, reconsider a final dividend in its current year.
Sibanye Gold has assets concentrated in the west Rand and the Free State consisting of three operating mines and a dump retreatment operation. Blue sky for Sibanye is actually brownfields extensions of existing assets which is the kind of organic expansion Glencore Xstrata CEO, Ivan Glasenberg, called for in his 2013 criticism of the mining sector’s poor capital discipline.
Similarly, Aquarius Platinum and Pan African Resources have turned in solid operating figures on the back of a narrow focus on a few assets. In the current mining market, it makes sense to keep it local and simple, it would seem.
Said Investec Asset Management’s Daniel Sacks of Sibanye Gold: “There has now been four consecutive quarters of delivery from the new management team which will go some way to dispelling some of the concerns the market has’.
Another company to watch in this vein is Royal Bafokeng Platinum (RBPlat). The company operates the Bafokeng Rasimone Platinum Mine (BRPM) and has a single growth project in Styldrift.
RBPlat, which posted full-year headline share earnings a third higher at 173 cents a share on March 4, registered a 12-month return of about 24% which compares to -14% for Impala Platinum, and a positive 8% for Anglo American Platinum over the same period.
