[miningmx.com] – SIBANYE Gold was treating the prospect of buying platinum assets as “a secondary option” in favour of participating in the consolidation of South Africa’s gold sector.
“All gold companies have cut costs and we can only get marginal improvements,” said Sibanye Gold CEO, Neal Froneman, who was speaking on the sidelines of the Joburg Indaba conference.
“We need a quantum shift [in cost savings] in regional and overhead structures,” he said, adding that gold producers were incurring R1bn per year in operating costs.
“We could save 60% to 80% through consolidation. Maybe there is some smart consolidation that can take place. I don’t think my counterparts are on a completely different page,” Froneman said without disclosing details of industry discussions.
Froneman’s comments come amid a near $800/oz decline in the gold price from 2011 when it traded just below $2,000/oz to about $1,200/oz this month. In the last 30 days alone, the gold price has fallen from $1,260/oz to $1,190/oz before recovering to $1,220/oz.
Froneman expressed a keen interest earlier this year in buying platinum assets that may become available following the five-and-a-half strike in the sector that producers said would precipitate extensive asset restructuring.
As part of its portfolio adjustments, Anglo American Platinum (Amplats) said it would merge its five Rustenburg-based platinum mines into three and then sell them, along with its Union section and the Pandora and Bokoni Mines joint ventures.
Since the end of the strike, however, deal momentum appears to have slowed especially after Amplats CEO, Chris Griffith, indicated the company wanted to extract a book value price for the assets it had earmarked for sale.
“If they are so good they should keep the assets,” said Froneman.
He added that a more thorough-going estimation of their value would only become available when Amplats had opened its data room. “So far we’ve only done desk-top studies from publicly available information,” he said.
Froneman said that an acquisition in the platinum sector would not be made if it threatened the company’s dividend policy which has been a feature of Sibanye Gold’s recent success. Sibanye Gold’s share price has doubled in the past year after establishing itself as a high yield play.
He also indicated there were two other potential platinum acquisitions still on the table, but declined to name them.
Lonmin and Impala Platinum may also be sellers of assets with both companies speculated to be considering raising cash in order to bolster their balance sheets.
They may first be assessing the cost of debt versus the funds they could raise from an asset sale.
