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'Nick did the right thing by demerging Gold Fields' mines' - MiningMx

Friday, 11 March 2016

BY all accounts Neal Froneman, CEO of Sibanye Gold and Gold Fiels CEO, Nick Holland get on. They were colleagues once when Holland was still CFO at Gold Fields.

More recently, they have been business partners in the sense that Holland demerged his South African mines – Kloof, Driefontein and Beatrix – to a company Froneman named Sibanye Gold and which he runs.

That name is about to change to Sibanye Resources reflecting the group’s breathtaking expansion into platinum and, imminently, coal. Base metals and perhaps even iron ore may be added.

As a result of this, and a “twice in a lifetime” depreciation of the rand, Froneman finds his company is worth almost the same as Gold Fields. He can’t supress a small grin of satisfaction on what he makes of these relative valuations: the ‘child’ is now taller and stronger than the parent.

“Nick did exactly the right thing. He had a great need for this [demerger into Sibanye Gold] to be successful because if it hadn’t things would have been worse for him,” said Froneman in an interview with Finweek.

“If I was Nick, I’d be saying ring-fencing the mines and putting in capital was the right thing to do. He obviously finds himself in a difficult position in terms of his strategy and what he may do,” he said.

That difficulty Froneman refers to is the fact that Holland’s Gold Fields is ex-growth in terms of production in early all of its international assets. It is spending a stack of money trying to find replacement gold ounces whilst hoping its stuttering and only remaining SA asset – South Deep – finds its feet and delivers a one quarter increase.

As for Froneman, life couldn’t be better. “At a gold price of R120,000/kg more than last year we can produce R5bn to R6bn more in revenue a month. At the current dividend payout of R1bn, we’re only on a 2% yield so we’d have to double the dividend to get the kind of yield we aspire to,” he said.

“It has gone better than we thought. No-one anticipated the rand. Those things only happen, say, twice in your lifetime. All the exposure we have to the rand at the moment is a windfall you can’t really organise.”


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