To Merge Or Not To Merge That's Sibanye's Question
Finweek English|9 April 2021
Are we going to see the combination of gold industry heavyweights? Finweek looks at the situation at Sibanye-Stillwater.
David McKay

On the subject of his firm’s speculated merger with Gold Fields and AngloGold Ashanti, Neal Froneman said: “We have at various points in time made suggestions to all the companies that are relevant in size here in SA and in North America.”

He added: “We remain active.”

That may be as detailed as Froneman, the burly, plain-speaking CEO of Sibanye-Stillwater, is prepared to get about this year’s most talked-about SA mining sector scuttlebutt: the consolidation of its three largest listed gold firms. Despite all the talk, there’s no actual deal as yet.

Asked whether he would consider a hostile bid for either of Gold Fields or AngloGold Ashanti, Froneman responded: “We think that hostile bids are value destructive. Our board has made it very clear to me that that’s not what we’re going to do.”

Froneman’s comments aside, finweek industry sources say Gold Fields and AngloGold Ashanti have had proposals to combine with Sibanye-Stillwater on their desks since the beginning of the year. Were consolidation of both companies by Sibanye-Stillwater to occur, it would create a 5m-ounce-a-year gold producer with a combined market value of R463bn.

Whilst this valuation is less than Anglo American, which is capitalised in Johannesburg at R781bn, it is nonetheless a number that bears comparison with North American gold peers Newmont Mining and Barrick Gold.

Analysts think such a combination of gold industry heavyweights could happen, but they also believe Froneman’s mere suggestion of the matter publicly, in response to a question at his firm’s annual results announcement in February, was a piece of tree-shaking knavery that could have unintended consequences.

“A takeover of AngloGold or Gold Fields will leave a large gap in the SA-listed gold space,” said Arnold van Graan, an analyst for Nedbank Securities, in a recent note. “We believe there is another alternative that makes plenty of sense from a strategic and valuation perspective: a merger between AngloGold and Gold Fields.”

The idea that AngloGold and Gold Fields could one day combine is old fare in the mining sector. Speculation linking the two has come and fizzled away – an out of reach “holy grail” given the position the two hold in the history of Johannesburg’s founding metal. This time, however, might be different.

Dennis Tucker, the former investment analyst and a corporate-financier who is now strategic advisor to Froneman at Sibanye-Stillwater, says the direction of any deal will ultimately be decided by shareholders. “They will decide whatever is the most accretive,” he says.

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