[miningmx.com] – NEAL FRONEMAN, CEO of Sibanye Gold, was keen to point out the company’s R406m bid for Witwatersrand Consolidated Gold Resources (Wits Gold) was “a small deal’, equal to about a month’s cash flow at last month’s gold price.
You can see why he’s anxious to downplay the quite patent acceleration in deal-flow at Sibanye which includes a mineral rights swap with Harmony and a share-based purchase of Gold One’s uranium and gold assets.
On the evidence of questions posed at the announcement of the proposed Wits Gold acquisition, analysts are wondering whether Froneman’s deal-making might distract him from the primary focus at Sibanye Gold, which is to return cash to shareholders.
No way, says Froneman.
“We are focused on maintaining dividend yield which is the first call on cash,’ Froneman said. “If don’t have dividends, we will cut projects. We will default to this,’ he said.
Still, there is a sense that Froneman is seeking to use Sibanye Gold’s balance sheet and cash flow to continue, revisit and fulfil some long-held ambitions.
Buying Wits Gold gives him the opportunity to turn around Great Basin’s Burnstone mine. The turnaround of marginal assets was the model at Gold One. Building Wits Gold’s De Bron-Merriespruit captures much of the junior/development he enjoys doing; whilst in Sibanye Gold there is ample uranium development akin to Uranium One.
In the long-term, Sibanye Gold could become a four million pound/year uranium producer using the combined output at Beisa which will grow from Beatrix as well as uranium from the company’s surface retreatment operations, and the Cooke assets.
One senses more deals could follow. In Froneman’s assessment, adding assets balances the portfolio, giving the company near-surface gold production which is cheaper to operate and potentially less complex to operate.
One wonders what shareholders will make of this. Growing too quickly might spook them; remind them that Froneman grew quickly at Uranium One.
One shareholder, Investec Securities, has commented in the past it doesn’t mind the fact that Sibanye Gold’s flagship mines – Driefontein and Kloof – have a defined, limited life of mine. It just wants the benefit of the harvest.
Froneman is a natural entrepreneur, and clearly a skilled miner – one who Cadiz Corporate Solutions’ analyst Peter Major calls the best in the country.
One suspects, however, his discipline is going to be tested in 2014 as more gold chips fall in his way from the table of his competitors and compatriot companies. Success for Sibanye Gold might turn on the projects Froneman turns away, rather than the ones he accepts.
