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Several platinum opportunities already abandoned - Sibanye Gold

Sibanye CEO Neal Froneman

Sibanye CEO Neal Froneman

Photo by Duane Daws

16th September 2014

By: Martin Creamer

Creamer Media Editor

  

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JOHANNESBURG (miningweekly.com) – A number of platinum opportunities had been pursued and several abandoned as they did not meet the required investment criteria, Sibanye Gold CEO Neal Froneman said on Tuesday.

Froneman told the Denver Gold Show in the US that entry into the platinum industry did not qualify as a strategic necessity and platinum assets would only be value enhancing if their acquisition prices were appropriate.

However, the evaluation of a few remaining platinum opportunities would continue into 2015.

The company, which ranks as the sixth-largest gold producer after Gold Fields and ahead of Agnico-Eagle, would not allow acquisitions to interfere with its promised delivery of a benchmark dividend strategy.

The R22.2-billion JSE- and NYSE-listed gold company, in which Gold One has a 19.9% holding, Allan Gray a 10.5% holding and South Africa’s State-owned Public Investment Corporation a 7.8% holding, has used only R1.8-billion of its R4.5-billion debt facility.

The largest geographical shareholding of Sibanye, which has 32.7-million ounces of gold and 102-million pounds of uranium in reserve, is the US with 37%, followed by South Africa’s 32% and China’s 20%.

In the next five years its gold production is expected to average 250 000 oz/y and its uranium production 500 000 lb/y to 570 000 lb/y.

The securing of key resources next to its Beatrix gold mine in the Free State gives it life-of-mine headroom and operational and infrastructural synergies with Wits Gold’s southern Free State project's expansion possibilities.

Beisa north and south provide critical mass to the uranium section, which is boosted by prospects at its Cooke shafts, and the Burnstone gold mine provides growth possibilities at comparatively low cost.

The company said that the weakening rand gold price was forming a natural hedge against lower revenue while its share price was outperforming its peers, the gold price and the indices.

Froneman reiterated that projects and acquisitions would be funded from cash flow after dividends.

The outlook for total capital costs an ounce was $1 100/oz and below for the foreseeable future.

The company told the Denver Gold Show that it was studying alternative shift arrangements to fit in with a bus-in, bus-out concept to allow migrant mineworkers to get home more frequently and hostels were being converted and a home ownership programme introduced.

Employee pay rewards were being aligned with investors and management through gain share and profit share schemes and interaction with near-mine communities was direct and not through municipalities, which had been found to be incompetent.

On platinum possibilities, the sector shared many similarities to the gold industry, which would facilitate skills leverage in medium-depth, tabular, hard-rock mines should appropriate acquisition pricing eventuate.

Although long-term platinum group metal price forecasts remained attractive, the metal’s price would not be used as the basis for determining value and acquisitions would only be considered if earnings-per-share proved accretive.

Edited by Creamer Media Reporter

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