Will Sibanye-Stillwater’s Froneman bid for AngloGold’s Mponeng? Definitely, maybe.

Sibanye-Stillwater CEO, Neal Froneman. Pic: Martin Rhodes

SIBANYE-Stillwater’s Neal Froneman is doing a pretty good impression of devil-may-care nonchalance regarding the prospect offered by Mponeng, the South African gold mine that’s up for sale courtesy of owner AngloGold Ashanti’s decision to quit the country.

But as reported previously in Miningmx, he’s not “panting” for deep-level, South African gold assets to which he added at the firm’s interim results presentation on August 29: “Would we have bid for it had it not been on sale? No”.

That, though, might be Froneman in poker-mode. He’s at the table, after all, having signed an NDA with AngloGold. His people are in the data room. And the track-record is that given the option, Neal does the deal.

This time, though, maybe he doesn’t. Is it possible Neal walks?

Maybe. Maybe not: Sibanye-Stillwater’s Driefontein borders Mponeng which would present synergies that might help bring down the average cost of gold production, and would provide a nice bump in reserves and resources.

But what about the balance sheet? Hasn’t Sibanye-Stillwater tagged net debt reduction and leverage control as a priority?

Well, according to James Wellsted, Sibanye-Stillwater’s spokesman, at current prices, and with events falling kindly – such as no platinum wage strike – the firm will be 1.8x net debt to EBITDA by year-end; and 1.5x by 2020 on its way to 1x net debt to EBITDA, a level that definitely catalyses the resumption of dividends, as promised.

So there’s definitely a chance of bidding for Mponeng?

It depends. In some ways, Mponeng’s not like other Sibanye-Stillwater takeovers because whilst no turnaround is required on the scale of Lonmin: Mponeng is short life with a major expansion investment falling due. According to JP Morgan Cazenove, Mponeng has a book value of $265m, and then some for the expansion.

Doesn’t Sibanye-Stillwater have it hands full with technically challenging tasks as a result of previous deals i.e. Blitz at Stillwater Mining, and the Marikana shafts at Lonmin?

Yep, definitely. But they don’t call for the reinvention of mining. At Blitz, the unexpected ground conditions are causing a delay, not a project rethink. At Marikana, the task is to motivate a demoralised workforce that actually contributed towards a profit in Lonmin’s last operating year. So the seeds for its recovery are already there.

In the end, it really does depend. It depends on AngloGold Ashanti’s selling price, on rival bids, the extent to which the current rand gold price confuses the picture. At the end of the day, AngloGold has said it wants to sell Mponeng (and Mine Waste Solutions). It could just mine out Mponeng as per its current plan, but one suspects Kelvin Dushnisky & Co will want to keep the momentum going rather than not doing anything and sitting with the status quo and future questions over the mine life of Mponeng. That’s just untidy. (So might be flexible on price/modality???).

What about Mine Waste Solutions?

Sibanye-Stillwater buys it using DRDGold as the vehicle. That’s a synergy that could happen.


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