NEAL Froneman, CEO of Sibanye-Stillwater, said the company was planning more transactions in battery metals, possibly in lithium, a mineral the company has priortised. However, there would be no new investments in Africa, at least in the short term.
“We are not going to be stopping any work on our battery metals strategy,” Froneman said today during a presentation of the firm’s latest deal: the $1bn acquisition of the Santa Rita nickel mine and Serrote copper project, both situated in Brazil.
“I think there is more to come. I can’t obviously lay it out in detail. We continue to look at opportunities. We are disciplined in what we do.
“There may be something smaller in the pipeline in the nearer term. But I would also say we will regroup, integrate these transactions,” he said.
Buying Santa Rita and Serrote takes the group’s spending on battery metals prospects to about $2bn this year. Sibanye-Stillwater bought the Keliber and Rhyolite Ridge lithium projects in Finland and the US respectively, as well as the Sandouville nickel processing operations in France prior to Santa Rita and Serrote.
“If there was anything significant to come in the shorter term, we have plenty of capacity to integrate,” Froneman said.
The political risk discount in Sibanye-Stillwater’s share price, however, means the company will continue to target acquisitions in Europe and North America.
“One of the valuation issues we suffer is the very high level of earnings that come out of a risky environment in South Africa. That is changing very fast. We are becoming much more international and that would bode well for a market that perceives us differently.”
Sibanye-Stillwater reported a mammoth R24.8bn in headline earnings for the six months ended June largely from platinum group metals production in South Africa.
“I don’t think we’ll improve perceptions related to risk if build a portfolio of assets in Africa rather than other destinations where there is a perceived lower risk,” said Froneman.
“We are not anti-Africa at all, but our focus is on the Europe and North America regions and their supply chains into them. Once we have got a substantial base, we will look to do more in Africa,” he said.
Sibanye-Stillwater said in September that it had targeted earning a third of profits from battery metals such as lithium. Froneman said the company was close to achieving this with the Santa Rita and Serrote deals.
Santa Rita would contribute 16,000 tons a year of nickel equivalent over an initial seven year life of mine. Serrote is an open pit operation to be conventionally mined over a 13 year life. It has been developed at a cost of $195m to produce an average of 20,000 tons of copper equivalent annually.
Asked to prioritise minerals in terms of future battery metals acquisitions, Froneman said: “Lithium is our highest priority … because it’s got the most upside. Nickel is a very close second. Cobalt is more difficult but cobalt is reasonably risky in terms of its future demand. There are question marks about cobalt in longer term.”
Froneman said the company would be careful not to over-extend its balance sheet. “We want to maintain an investment grade so won’t be overly leveraged,” he said. The Serrote and Santa Rita acquisitions will be financed from internal cash resources.
“Our capital allocation framework is clear: it is sustaining our current business; we are [also] committed to paying dividends and being opportunistic about share buy-backs when appropriate,” he said.