JOHANNESBURG (miningweekly.com) – The newly listed, proudly-South African Sibanye Gold, unbundled out of Gold Fields, did not have to go deeper to grow the business, its CEO Neal Froneman said on Monday.
The 45 000-employee company, which was targeting 1.4-million ounces of gold production in 2013, expected free cash flow of R2.5-billion to underpin a corporate strategy of returning cash back to shareholders.
Free cash flow would be the primary performance measure: “It will be about returning cash back to shareholders and becoming a high-yield vehicle,” Froneman said on listing.
The first trades of the company that owns the Kloof, Driefontein and Beatrix gold mines came in at R13.05 a share, rose to R13.75 and then settled on R13.56 towards market close.
In contrast, Gold Fields declined 13.19% to close at R91.85 a share.
Nearly half of the shares in the R20-billion Sibanye, meaning ‘we are one’, were held in the US, 24% in South Africa and 10% in the UK, said Froneman of the company that would only refocus on going deeper once technology had progressed sufficiently.
“We have lots of other alternatives,” he told Mining Weekly Online in the attached video interview.
The first of these would be to bring current measured resources into the reserves category through a lowering of the cost of mining.
“Those are existing orebodies that are falling outside of the payability level right now,” Froneman explained.
“If you benchmark our company against the rest of the industry and even similar-depth gold mines, our costs are far too high,” he said.
His focus would be to re-establish operating credibility by reducing costs and improving productivity.
The second opportunity would be to mine the surfeit of secondary reef, which, although low in grade and patchy, had the advantage of being relatively shallow and close to existing infrastructure.
The third opportunity and probably the most important focus area in the short term was Sibanye’s surface tailings joint venture with Gold One, the company Froneman headed before being appointed to head Sibanye.
“That’s our fourth mine. It’s a mine that will change our risk profile. It’s not labour intensive. It’s high margin.
“Environmentally it’s smart. It’s cleaning up the entire region, and that’s our focus in terms of growing output,” he said of the 20-year-life surface material, which had the potential to add materially to Sibanye’s output.
PROFIT-SHARE FOR WORKERS
The company, with a resource base of 74-million ounces, of which 29-million were below current infrastructure, was committed to worker profit-share schemes and initiatives directed at improving the wellbeing of employees through health services.
It would be conscious about where its employees lived and how they were living.
It would also tackle the vexing issue of migrant labour’s infrequent rural home visits, pointing out that migrant working patterns in the rest of the developed world involved home flights every three to six weeks.
“I don’t think we can fly large numbers of people in and out of the operations, but there’s no reason why we can’t bus people home at shorter periods than once a year, and that’s an area we’re looking at,” he said.
Many migrant workers had been loyal to mining companies for long periods and they deserved employer loyalty.
Migrant labour could thus not be ended at the drop of a hat, although its complete phasing out might be possible in the long term.
While people were the company’s most important asset that did not mean that Sibanye would be intimidated by illegal strike action.
“If necessary, we’ll shut down our operations for three to six months,” Froneman told Mining Weekly Online, as it was unfair to expect shareholders to foot the bill for illicit industrial action.
His review of safety performance at Sibanye’s mines revealed considerable improvement in trucking and tramming, and fall-of-ground accidents had reduced substantially with the implementation of netting and roof bolting.
Those activities had impeded productivity.
“We need to keep the good things and at the same time get back to decent productivity levels,” he said.
The operations were achieving half the productivity rates that they did ten years ago.
“It’s not because people are not working as hard as they did ten years ago, but it’s more difficult for them to achieve. We need to give more time at the face, but in total, we don’t need to work more time,” Froneman added.
As an independent company with no Gold Fields cross-shareholding Sibanye would be able to use its cash for itself and be liberated from the capital requirements of developing Gold Fields projects.
Both Sibanye and Gold Fields would remain South African-domiciled companies with their primary listings on the JSE and secondary listings on the NYSE.
Sibanye would be able to participate more fully in research and development work in pursuit of technological innovations, which could unlock the mineral reserve and resource potential of the South African mines in high-grade remnants and pillars as well as at depth.
The company also intended to pursue synergistic opportunities for consolidation in the South African gold industry.
There would be no job losses directly as a result of the creation and unbundling.
The corporate office at Libanon in Westonaria reflects the desire of Sibanye to be closer to the operations.
An indication of union resistance to the emergence of Sibanye was the decision of the National Union of Mineworkers to arrange a 10 000-member march to protest the unbundling.
Froneman said, however, that only 1 000 people arrived on site, of which 500 were marshalls.