Sibanye-Stillwater says “very difficult” to find value in re-rated global gold sector

SIBANYE-Stillwater said it was “very difficult” to find value in the gold sector given the re-rating of equities in the past two years.

“We do like the gold sector and we would like to diversify into North American owing to its lower geographical risk. But we typically invest in a counter-cyclical way,” said James Wellsted, spokesman for Sibanye-Stillwater.

The company currently produces gold from its assets west of Johannesburg. It has guided to production of 756,000 to 812,000 oz for the 2020 financial year.

The Johannesburg headquartered company was connected to discussions with Kinross Gold which the Globe and Mail said last week was considering selling its North American assets and re-listing its West African and Russian assets in London.

“We have been looking in the gold space, and began looking seriously about two years ago, when there was clear value, just before merger and acquisition activity began,” said Wellsted. The firm’s CEO, Neal Froneman, said it had held talks with three North American gold companies before the Covid-19 pandemic, the Globe & Mail said.

“We have held talks but I’m not going to say with whom. We won’t speculate on that,” said Wellsted. Sibanye-Stillwater recently reinstated dividends after a three-year hiatus following the $2.2bn acquisition of Stillwater Mining in the US.

RBC Capital said there was less rationale for Kinross to demerge the assets as reported given the improvement in gold industry ratings. It valued the firm’s North American assets at about $9bn, equal in value to Sibanye-Stillwater’s current market capitalisation.

Kinross operates the Tasiast mine in Mauritania at which a phase two $150m expansion was last year approved increasing gold production to an average 563,000 oz/year between 2022 and 2028 from 391,097 oz mined last year.

Including the Chirano mine in Ghana, Kinross’ African assets generate about a quarter of the firm’s total 1.2 million oz in annual production.

Kinross is scheduled to provide an update on the “… operational details regarding the company’s recently announced three-year guidance and additional opportunities in its portfolio” on Tuesday.

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