Sibanye-Stillwater buy-back proves firm won’t “waste money” on M&A says Froneman

Neal Froneman, CEO, Sibanye-Stillwater

SIBANYE-Stillwater opted to buy back R10bn worth of its shares last week in a demonstration that it wasn’t going to waste money on mergers and acquisitions, said the group’s CEO, Neal Froneman.

“It demonstrates that our capital allocation framework is real and everyone thinks we’re just going to waste money on M&A and so on,” he said in an interview.

Sibanye-Stillwater was connected with offers to buy South African gold producers AngloGold Ashanti and Gold Fields earlier this year. Although Froneman stopped short of confirming actual approaches, he said the consolidation of JSE-listed gold companies would create “a national champion”. Sibanye-Stillwater is known to be seeking further gold exposure in order to provide some counter-cyclicality in its asset mix.

Froneman said he doubted whether the company’s peer group in platinum group metals (PGMs) production would follow suit because the R192bn company was undervalued.

“I think we’re the most undervalued PGM stock, and therefore I’m not so sure that it makes sense for others to embark on a buy-back of the scale that we have,” said Froneman. “That’s a matter of opinion.”

“When you put all these things together, a buy-back is a really good option for us,” Froneman said. Shares in Sibanye-Stillwater are currently trading at R64,78 per share, nearly 4% higher over the past 30 days but 85% higher on a one-year basis.

Asset management company Ninety One said in a recent note that it considered South Africa’s PGM companies to be undervalued owing to the major demand kick offered by the hybrid electric vehicle market. Investors had not fully recognised the deficit that may develop especially given supply-response restrictions, it said.

Sibanye-Stillwater plans to buy a total of 147.7 million shares between June 2 and April 6, 2022. Froneman said there was no intention of the buy-back altering the firm’s commitment to a dividend policy which is to pay 25% to 35% of normalised earnings.

Sibanye-Stillwater announced in February that it would pay a R10.7bn final dividend after recommencing the payout at the interim stage in August.

In May, Froneman promised “future windfalls” as a result of record PGM prices after the firm’s mines generated R15.3bn in first quarter earnings before interest, tax, depreciation and amortisation.