Neal Froneman. Picture: BUSINESS DAY / MARTIN RHODES
Neal Froneman. Picture: BUSINESS DAY / MARTIN RHODES

SIBANYE Gold was for the first time considering acquisitions outside SA’s borders, taking advantage of the distressed finances of other companies and the strength of its own shares and balance sheet, CEO Neal Froneman said last week.

Sibanye, which will change its name to Sibanye Resources in the near future, will have gold, platinum, coal and uranium assets, and is looking at gold and other opportunities, possibly in base metals, to add to its rapidly growing portfolio, which is geared to generate cash and pay dividends to shareholders.

"As long as we make the right-priced entries into the right commodities at the right time, there is no reason why you can’t build on that dividend yield thesis," Mr Froneman said, adding that Sibanye’s shares were starting to receive a premium rating from investors.

"For us to make an entry into another commodity, we’d have to look at where it is in the cycle and how close it is to a bull run. Base metals will be more of a focus initially than bulk commodities," he said.

"There are some seriously distressed companies out there. I don’t think we’ll be going to Australia or North America. We are sub-and southern-African focused when we talk of outside SA, and we’d want to buy producers."

Sibanye Gold faces an electricity bill of R10bn a year if Eskom continues hiking prices, and is stepping up efforts to reduce its reliance on the state-owned power utility and ensure a reliable supply.

Sibanye is already among the top 10 of the biggest electricity users in SA, consuming 500MW of power. Assuming it concludes the purchase of three underground platinum mines and two concentrators from Anglo American Platinum successfully, as well as the whole of Aquarius Platinum, its electricity usage will soar — as will its costs.

Should Eskom increase its tariffs by 15% or more for the next five years, Sibanye would spend R10bn annually on electricity alone, Mr Froneman said.

"That is a bloody big number," he said. "Anything we can do to bring that down will be extremely important. Even a 10% reduction would save us R1bn. Relatively small numbers will bring big savings."

Sibanye is in talks to conclude financing for the first 50MW solar array for its Kloof and Driefontein mines near Carletonville, which will have sun-generated electricity from the end of next year. Another 100MW will be added in time, giving the entire project a cost of about R3bn.

It is busy concluding a deal with Waterberg Coal, which would see Sibanye acquire up to 51% of the company, giving it access to thermal coal it could sell to an independent power producer and secure relatively cheap and reliable electricity.

Sibanye has registered itself as an interested party with Anglo American, which wants to sell thermal coal mines in SA. These are the mines that supply Eskom on long-term, low-cost contracts.

One market commentator questioned the wisdom of buying only the Eskom-linked Anglo coal mines given that Glencore and Exxaro Resources have both run into bitter contractual disputes with the state-owned power utility around supply and pricing.

Glencore sold its Optimum colliery to the Gupta family’s Tegeta Exploration and Resources for R2.1bn, raising the question of how Tegeta would generate profits at the mine supplying Hendrina power station when Glencore could not.

Bloomberg reported last week that Eskom was buying Optimum coal for its Arnot power plant after cancelling a contract with Exxaro.

"We need to understand the assets and the inter-relationship with Eskom and the requirements much better than we do, and if there is something that fits in with our energy strategy," Mr Froneman said.

If market speculation is accurate and Aquarius CEO Jean Nel takes up the role as CEO of Sibanye’s platinum division, all eyes will be on which experienced and respected coal figure will be recruited to head the coal and energy division.