Neal Froneman’s empire?

2014-07-20 15:00

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If the rumours are true, Sibanye Gold CEO Neal Froneman is set to become South Africa’s most important mine boss with a major hand in both the labour-intensive gold and platinum sectors.

It is well known that Anglo American Platinum (Amplats) wants to sell its Rustenburg operations and concentrate on its vastly more profitable mines in Limpopo. It is also universally assumed the buyer will be Sibanye, which listed on the JSE early last year when Gold Fields unbundled all its South African mines, except the mechanised South Deep project.

This week, Froneman said Sibanye was looking at Amplats, but also four other possible acquisitions in the platinum industry.

The targets do not include any early-stage mining projects, and any platinum mine he might buy will have to come with a refinery, he said at a briefing with journalists this week.

If Sibanye buys the Amplats assets, his company will have nearly 60?000 employees, making it the major mining employer in South Africa – and the natural leader in whatever new labour challenges lie ahead.

Sibanye’s gold mines, Kloof and Driefontein, are also among the few in the gold industry where the Association of Mineworkers and Construction Union has a serious foothold.

Most South African platinum mines are similar to the country’s traditional ­­­ deep-level gold mines in terms of technology and labour arrangements.

The big difference is the refining, which is far trickier for platinum group metals (PGMs). A good refinery operation will likely be key to Sibanye’s strategy.

Froneman suggested he wants his own PGM refinery, of which there are four. Two belong to Amplats, while Lonmin and Impala Platinum have one each.

Smaller platinum companies rely on the big three to refine their product.

The other issue is funding.

Froneman says South Africa is in a desperate situation in terms of reputation and profile, and South Africans are now finding they cannot even book a meeting with potential funders offshore.

“You cannot promote a South African gold or platinum company in the rest of the world,” he says.

At the same time, he claims that Sibanye is perfectly able to raise the cash to buy Amplats’ mines.

Anglo’s assets up for sale are estimated to be worth between $1?billion (R10.7?billion) to $1.4?billion, but he is not expecting to pay that much.

If sibanye buys the mines

Amplats’ Rustenburg mines contribute the lion’s share of its production of more than 1.1?million ounces a year.

Without these mines, the company will be more or less on par with Lonmin in terms of size.

They fit the profile of Sibanye’s current portfolio, three mines inherited from Gold Fields.

If the deal materialises, investors will be looking to Froneman to duplicate his aggressive dividend-focused strategy at his gold mines.

At the Kloof, Driefontein and Beatrix mines, Sibanye cut employment by 14% to 36?000 within a year.

In the first quarter of the year, more workers were let go, although the company has not yet provided figures.

The job losses were not only due to purposeful rationalisation, but also due to fire damage, making some parts of Sibanye’s mines unworkable.

The company’s gold production performance is difficult to gauge.

In the first quarter this year, it produced 10?338kg.

While that is 11% better than a year earlier in the first three months of last year, it is also 14% worse than in the last quarter of 2012.

Pay package

Royal Bafokeng Platinum (RBPlat) this week helped the National Union of Mineworkers (NUM) regain some credibility by agreeing to a “historic” wage

deal that resembles the one struck between Amcu and the major platinum companies last month.

By July 2016, the lowest-paid employees at RBPlat will get a guaranteed package of R14?594 per month, says the NUM.

RBPlat’s ability to afford this is helped by the fact that 58% of the 6?517-strong workforce at its flagship Bafokeng Rasimone Platinum Mine operation is subcontracted and will not get the new package.?

But unlike the Amcu deal, the NUM’s deal with RBPlat increases the role of the housing subsidy, which will be progressively converted into a subsidised bond for 3?100 new houses being built by the company, for the permanent employees.

This will rise to R3?900 per employee by July 2016, says the NUM. The Amcu deal put the overwhelming emphasis on cash payments.

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