Sibanye beefed up for union action
Sibanye-Stillwater's plans to take over Lonmin and become the world's largest platinum producer will not be derailed by trade unions, CEO Neal Froneman told Business Times this week.
Though the deal will give his company more exposure to the Association of Mineworkers & Construction Union (Amcu), Froneman is not shying away.
"We've just shown them that in two days we can raise R4bn, which gives us R10bn on the balance sheet. It's a little bit of a message to the unions as well that we can access money under the right conditions," he said.
Sibanye tapped shareholders for nearly R2bn and got almost as much from a forward gold sale arrangement with Citibank.
Amcu has been on strike at Sibanye's gold operations for almost five months, casting a shadow over the upcoming wage negotiations in the platinum sector, where it is the dominant union. In 2014 Amcu dragged out a strike in the platinum sector for five months.
"[Even] if the strike continues, and potentially there's another strike in [platinum] they [Sibanye] can stay afloat," said Mergence Investment Managers analyst Thobela Bixa.
Sibanye's US business could be its most useful weapon. Two years ago Sibanye acquired Stillwater, a platinum group metals producer. Froneman said: "I think that further balance sheet strengthening will come from cash flow generation, more specifically out of our US business, which is actually performing quite well at the moment."
Sibanye started off as a South African gold producer when it was spun out of Gold Fields in 2013. It has since built a portfolio of platinum assets, buying some of Anglo American Platinum's mines as well as Aquarius Platinum.
The deal with Lonmin — an all-share offer valued at around R5.2bn — will give it capacity to comfortably produce more than 2-million ounces of platinum a year, making it the world's largest miner of the metal.
But gold has been a problem, mostly due to the strike. Amcu is not the majority union at Sibanye's gold operations, according to an independent verification process.
Amcu previously said the process was flawed. On Friday Amcu president Joseph Mathunjwa said the strike would continue.
Old Mutual Invest analyst Meryl Pick sees Amcu's hard line at Sibanye's gold mining business as a "power play more about the platinum assets. The strike in gold seems to have been a warning shot by Amcu."
The union has appealed the decision by competition authorities to approve Sibanye's takeover of Lonmin. And it wants a two-year moratorium on job cuts. Froneman and analysts see the deal going through. He is not known for backing down. "If we have to hold out, we'll hold out for as long as is needed."