Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Sibanye Gold Ltd. plans to resume dividends within the next 18 months after paying down its debt.
In an interview with Bloomberg News, Chief Executive Officer Neal Froneman repeated that he’d consider buying more gold assets in South Africa or elsewhere, once the company reduces its debt. The comments show that the producer, which scrapped dividends a year ago to deal with the obligations from major acquisitions, is charting a course back to growth after a disastrous year.
Sibanye’s platinum and palladium operations are benefiting from a weaker South African rand and its acquisition of Lonmin Plc will help boost income and speed up debt repayment. “I do think in 18 months it would be a good time to start looking at possible growth in gold not just in South Africa, all over,” Froneman said. “We would have to see what the lay of the land is like for gold, in 2020.”
Sibanye shares climbed as much as 7.2 percent in Johannesburg, the most in three weeks. The stock is still down 41 percent this year.
Sibanye lost almost half its value this year on concern the company has taken on too much debt from acquisitions. It has also struggled with an increase in fatal mining accidents in South Africa. The company reduced debt levels in recent months due to a $500 million cash injection from a streaming deal with Wheaton Precious Metals Corp. The latest financial results show its ratio of net debt to earnings before interest, tax, depreciation and amortization dropped to 1.85 after the streaming deal, down from a previous 2.6. Sibanye’s acquisition of Lonmin will be wrapped up early next year if it receives final regulatory approval for the merger on Nov. 23. The acquisition threw a lifeline to Lonmin, which struggled through years of losses forcing it to seek debt-covenant waivers from lenders.
(By Felix Njini)
