Welcome to Rustenburg, Mr Froneman – by Warren Dick (Moneyweb – September 10, 2015)


Sibanye to join the ranks of the platinum producers

The CEO of Sibanye Gold* (to be amended shortly) in negotiations with Anglo American Platinum (Amplats) has bobbed and weaved, ducked and counterpunched, but finally, Neil Froneman appears to have landed a potential title-winning blow for shareholders. In the process Sibanye might well move up a category, from middle to heavyweight.

This is because the R1.5 billion plus deal (more about this later) looks to provide a sizable entry point for Sibanye to enter the platinum group metals (PGM) market through the acquisition of the Rustenburg Operations from Amplats.

Speaking at the announcement of the deal yesterday, Froneman said, “we were very disciplined and structured. We had to make sure our first entry into platinum was significant, but we haven’t rushed into it.” Froneman demonstrated that discipline when he walked away from a deal with Amplats in October last year with those immortal words, “Well if they [the assets up for sale] are so good, they should keep them.”

In response to a question from an analyst on how the two parties came to agree on the price the second time around, Froneman revealed why he has a reputation as a skilled dealmaker. “Initially we had very different ideas of value [for the assets]. But when we took a different view in terms of sharing the risk, it allowed us to come together on getting the deal done.”

That last part of his statement around “sharing the risk” is the nub. By convincing Amplats to share the risk, he turned the haggle over price into a more cordial engagement involving mutual benefit. And by doing so, Froneman could then – with a little more maneuvering – take a potentially large and risk-fraught transaction for Sibanye, and make it congruent with the company’s strategy of delivering returns to shareholders via dividends. (As we will explain).

Mechanics and value of the transaction

So, who gets what? Under the terms of the deal, Sibanye will pay Amplats R1.5 billion upfront, which can be via cash or shares. At Sibanye’s election. (Regulatory approval from the Department of Mineral Resources and the Competition Commission should take about twelve months).
For the rest of this article, click here: http://www.moneyweb.co.za/news/companies-and-deals/welcome-to-rustenburg-mr-froneman/