[miningmx.com] – NEAL Froneman said he recognised the benefits of incorporating assets of Gold One International, the company from which he has resigned, into Sibanye Gold, the firm Gold Fields proposes will house its unbundled South African mines and of which Froneman was today nominated its CEO-designate.
However, his priority was to improve the performance of the existing assets in Sibanye, he said.
Gold Fields said today it intended to unbundle the KDC and Beatrix mines held in GFI Mining South Africa (GFIMSA), operations that in Gold Fields’s last financial year produced 1.4 million ounces of gold, and produced a pretax profit of R6.8bn.
“I know I have a reputation in the industry as an entrepreneur and a bit of a pac-man, just gobbling up assets for the sake of consolidation. But I don’t want to create that impression; firstly it just chases up the valuations and secondly, we need to focus on core operations,’ Froneman said in an interview.
Based on the first half of calendar 2012, Sibanye’s mines produced just under 700,000 oz of gold, marginally more than AngloGold and some 150,000 oz more than Harmony Gold. However, production had roughly halved at KDC and Beatrix since 2007, pressurising margins and creating a situation Nick Holland, Gold Fields CEO, said was not sustainable.
The mines were given a median enterprise value of only R13.5bn assuming a gold price of R400,000 per kilogram (R/kg) and a market value of R19bn against the R30.9bn given to Harmony Gold’s R31bn market value. As a result, Froneman said there was value to be unlocked first from the mines.
There was also brownfields growth inherent in the company, he said. There were some 10 million oz of gold in resources beneath infrastructure at the Kloof section of KDC, and 8 million oz beneath infrastructure at Driefontein. “There are sensible down-dip extensions we can do,’ he said.
Froneman acknowledged there would be a significant overhang in the Sibanye share once it started trading, planned for about February 11. “There will be huge churn but we will attract investors looking for yield,’ he said.
Sibanye Gold’s share will be under pressure because the restructuring of Gold Fields is largely driven with its international shareholders in mind. Released from some of the South African risk, shareholders of Sibanye are likely to sell their stock quickly.
But Froneman believed Sibanye could attract “a new breed’ of shareholder replicating the share register development of Gold One International, which was largely Asian. “I admit that we will want to leverage off the same shareholders,’ he said referring to Gold One’s following. “‘It [the company] will have an Asian brand in 12 to 18 months [of listing]. We will market it in places like Hong Kong and Singapore,’ Froneman said.
The notion is that Asian shareholders are looking for high dividend yields, but there was also pressure on Froneman to grow the company implying a degree of capital expenditure. “I don’t think there’s a conflict there,’ he said in response to analyst questions on the point. “It’s a question of balancing the portfolio,’ he said.
