TWO years ago, following a series of fatal accidents in his company’s gold mines, Neal Froneman thought Sibanye-Stillwater might be in financial trouble.
“It was the safety issues in 2018 that really put us on the back foot,” he said in response to a question during the Joburg Indaba PGM day, an online conference.
Twenty one miners died in Sibanye-Stillwater’s Driefontein and Kloof mines west of Johannesburg in 2018 following seismic events. At the time it, represented half of all fatalities in South Africa’s mining sector and whilst the company’s production was not heavily disrupted, the safety incidents contributed towards a 42% decline in the firm’s share price already weighed down by high debt and uncertainty about a merger with Lonmin.
“My advice would be that in taking on debt make sure you have got enough capacity to deal with it,” he told the conference.
Today, the firm’s share price has all but matched its previous record high having bedded down the acquisitions, including Lonmin, and reduced net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) to 0.5x from 2.5x in 2018.
Sibanye-Stillwater has also reinstated the dividend as part of a strategy to reward shareholders for their patience as the firm repositioned itself as a platinum group metal (PGM) and gold producer.
Froneman said in August the company did not anticipate embarking on fresh acquisitions, yet the market is attempting to anticipate his next move.
“Battery metals are complimentary to PGMs as we are already in that market. That does extrapolate to nickel and copper,” he told the Joburg Indaba.
There was less interest in investing in African-based projects whilst the firm, were it to conduct fresh deal-making, would seek near-production or cash generating assets, most likely in North America. “That is where we would like to grow our exposure.”
Whilst valuations were high, Sibanye-Stillwater would consider “a project that has gone wrong or where management has been discredited. That’s where we might find value.
“We scout the market all the time … That’s not to say anything is imminent. Maybe we would look at something in six to nine months,” he said.