SIBANYE-Stillwater CEO, Neal Froneman, said he didn’t have a board mandate to launch a hostile takeover of potential gold targets, adding – however – that the widening valuation between platinum group metal (PGM) and gold firms would enable his firm to make “a very compelling offer to shareholders”.
“We think that hostile bids are value destructive. Our board has made it very clear to me that that’s not what we’re going to do,” said Froneman in an interview with Finweek magazine.
Gold-only companies have performed relatively poorly against Sibanye-Stillwater lately which has the benefit of PGM production. The gold price has weakened this year, but PGMs – especially its minor metals such as rhodium and iridium – have soared in value.
“We now forecast average gold prices of $1,732/oz in 2021, a decrease of 5%, and prices of $1,696/oz in 2022, a decrease of 5%,” said Josh Wolfson, an analyst for the Canadian bank. In contrast, PGM companies were still “under-owned”, according to a report by Tyler Broda, an analyst for RBC Capital Markets.
Given the upwards trajectory of PGMs: the premium to gold shares is only likely to widen, making a Sibanye-Stillwater all-share bid for gold consolidation cheaper over time.
“We could sit on our hands and we’ll be a $20bn company in six or nine months’ time (it is currently valued at $13.2bn),” said Froneman. “We are re-rating almost every day and you can see it in the potential of what we’re going to earn this year,” he said.
Sibanye-Stillwater produced record full-year earnings of R29.3bn in the year ended December, and paid R9.4bn in final dividends after reinstating the interim payout in August. It has all but wiped out debt, unveiled gold and PGM projects worth R6.8bn, and taken a tentative first step into the battery minerals sector with a R714m investment in the developer of a R6bn lithium project in Finland.
Froneman rowed back on earlier comments that he planned to resign following his next major deal. He told Finweek: “I must tell you I don’t find my job boring. I’ve probably got three to five good years still to put into the business.”
The full interview with Neal Froneman will be published in Finweek on April 9.