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Sibanye-Stillwater’s share price may have seen the worst

The future lies in battery metals and international growth.

Sibanye-Stillwater’s CEO Neal Froneman had some sobering words for policy-makers at the Joburg Indaba this week.

2014 marked SA’s descent into a dark period of corruption, from which it is now beginning to emerge. “We need to grow outside of SA. We’re not leaving SA. We are committed to investing R4.5 billion a year in sustained capital in SA. But the investment climate in SA is not yet conducive to investing in projects with a 10 year time horizon.”

The Labour Relations Act needs to be more business friendly, and until that happens investors will hold back. Government needs to focus on service delivery, and understand the role of business in the economy. “That’s one reason why we bought Stillwater in the US,” said Froneman.

The gold and platinum group metals company has been stung by a particularly gnarly strike involving the Association of Mineworkers and Construction Union (Amcu), which broke ranks with rival trade unions last year in its demand for higher pay. Amcu had spent five months helping negotiate the agreement, then refused to sign it just before Christmas last year.

Last week the Labour Court ruled that the wage agreement reached between the company and three other trade unions could be extended to Amcu and other “non-parties” to the agreement. The company is now proceeding with an independent union verification process to confirm the three trade unions (National Union of Mineworkers, UASA and Solidarity) comprise a majority, which should bring an end to the Amcu strike.

Froneman also suggested it might be time for Amcu to choose new leadership with a more constructive approach to labour relations. Asked whether the Labour Court ruling would break Amcu, Froneman said it was not democratically run, but at the same time he did not want to see a weak trade union. “We want them (Amcu) to recognise that we are managers appointed to look after the interests of all stakeholders.”

Sibanye-Stillwater is a unique blend of platinum group metals (PGMs) and gold. The gold mines are ageing, though decent quality, comprising Beatrix, Kloof, Cooks and Driefontein.

In 2016 it acquired Aquarius Platinum as well as the Rustenburg platinum asset of Angloplats. In 2017 it acquired the US operations of Stillwater, based in Montana.  and composing two operating mines and metallurgical plant. Stillwater is the sole primary producer of palladium in the world. Elsewhere, it is produced as a by-product of PGM production. It is also in the process of acquiring Lonmin, which will allow for consolidation of operations in North West province and gives Sibanye-Stillwater additional metals processing facilities.

The Stillwater acquisition in the US was a brilliant call, coming as it did just before the palladium price went parabolic, reaching $1 500 an ounce last December. The platinum price has been going in the opposite direction, though the two metals are conjoined and there is speculation that platinum – and gold – may be about to share in some of palladium’s shine. Platinum is used in making catalytic converters for diesel cars, where sales volumes are dropping (partly because of emission tampering scandals). Palladium is more used in petrol-engine cars, with demand being driven by tighter environmental regulations.

In 2008 one ounce of platinum used to sell for five times an ounce of palladium. Now it sells for 57% an ounce of palladium.  Sibanye saw the looming supply deficit in palladium, and Froneman says he believes the price will go higher still. “We’re bullish on palladium up to 2025, possibly even to 2030,” says Froneman.

The Stillwater acquisition was financed with whale-sized debt of $2.6 billion (R38 billion), which is one of the drags on the Sibanye-Stillwater share price. The strike in the gold sector is another. The blizzard of acquisitions in the last few years has also taken a while to digest. But with the strike likely to end, and the palladium price through the roof, the fog of bad news should clear and allow a little sunshine into the share price.

Just as Sibanye saw opportunity in Stillwater that others did not, Froneman now sees opportunity in batteries – specifically battery metals. This explains its recent acquisition of SFA (Oxford), which provides research and intelligence on precious metals and battery materials.

The future of motorised power will involve electric power trains, powered by hybrids, fuel cells or batteries. Sibanye is already well positioned in gold and PGMs, but not in battery metals.

The group has a strong base in SA, but has little option but to grow outside SA in the future, says Froneman.

Sibanye share price

 

Palladium price in USD

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If South Africa does not experience its own Margaret Thatcher moment soon, it will experience a Grim Reaper moment later. This is the essence of local politics.

We need a leader with the resolve and the political strength to break the stranglehold of labour unions, or the unions will cause further unemployment, poverty and starvation. For how long will Treasury be able to afford the social grants while the unions run amock? There is a very thin line of brave, but emaciated and tired taxpayers who stand between stability and chaos, food security and famine, order and anarchy.

The Grim Reaper is always ready to clean up the mess caused by ignorant and myopic voters.

I admire your optimism. The line has however been crossed. Terminal decay leading to death is simply a scientific fact. Our beloved country is already a failed state

For most South Africans life is better than it has ever been. This is about to change in a serious way. There was a deep source of capital, experience, expertise, institutional capacity and goodwill to fund socialist political projects. All those positive factors are depleted now. For the first time in 25 years, the socialists will have to fund themselves. Up to now, they have been sponsored by the structures left behind by the capitalist class.

The liberation project was 100% dependent on the “trust fund” left behind by the “oppressor”. From now on forward the average voter will pay for their mistakes.

The few wise decisions can still turn the ship away from the rocks. The problem is however, that stupid people never make wise decisions….

Excellent comment Sensei … nail.head

Agree Sensei. A “hire and fire” labour policy (as in the US) can do SA only good 🙂

With the Gold price dropping how could the share price have seen its worst?

Plus the Chinese manufacturing is picking up, the US-China deal is closer, less need for Gold.

Where is the Competition Commission on the undemocratic trade unions?

I am in total agreement with you Sensei.
My family ran three Franchised food outlets on the East Rand.
For seventeen years we never had any Trade union activity in the stores. We all got along and I ran the stores along the guidelines of the Bargaining council governing our industry.All the Trade unions were party to the signatures agreed by the bargaining units.
In December 2017 we arrived at work to find that every staff member in each store had been approached to join a trade union, which most subsequently did.
From that day forward the relationship between management and employees went south.
In September 2018,I sold all three stores to a consortium of investors who have done well to leverage out the troublemakers and most of the remaining employees have since resigned.
The consortium have big financial backing and could absorb industrial action, something I was never in a position to do.
We bought a food business a month later with a staff compliment of fourteen which we can manage and the lesson learnt is always top of mind but my broken heart is proving hard to mend.

I believe there is a 50/50 chance CR can steer the ship in the right direction…..the orange light is on….South Africa has run out of capital…robbing the cashflow by nationalising the Reserve Bank is not going to get us back on track. Nor is punishing the shareholder or taxpayer. What will get us back on track is what made this country great in the first place – it’s people ( ALL it people) it’s resources and regaining our Corporate identity as an honest and ethical country. We can do it…. before the light turns red.

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