Sibanye Says Uncertainty Halts South Africa Capital Spending

(Bloomberg) -- Sibanye Gold Ltd., the biggest producer of South African gold, will shun new capital spending in the country because of an uncertain investment environment.

“It’s difficult to convince shareholders that South African mining is an investment case,” Chief Executive Officer Neal Froneman said in Johannesburg Wednesday. The climate is “not yet conducive to make decisions that require billions of rand,” he said.

Sibanye’s stance comes as South African miners mount a legal challenge to government plans for redistributing the nation’s mineral wealth, saying it will deter new investment. Froneman ramped up the pressure by saying his company is considering moving its primary listing from South Africa.

“There is definitely a perception around a South Africa discount,” the CEO said, although the differential with exchanges in North America has narrowed since Cyril Ramaphosa took over as the country’s president. Shifting its listing would also help lower Sibanye’s debt costs, he said.

Sibanye shares rose 2.4 percent as of 2:45 p.m. in Johannesburg trading, bringing this year’s gain to 77 percent.

Froneman said Sibanye’s Driefontein gold mine, once the biggest in Africa, is nearing the end of its life as the company can’t justify the spending required to deepen it. The company’s Kloof and Beatrix mines remain good-quality assets, he said.

Value Destruction

The value destruction from a four-month wage strike at Sibanye’s gold mines “has been enormous,” Froneman said, adding that the company “won’t be bullied” into agreeing to unsustainable pay increases.

Sibanye, which has diversified into platinum-group metals, will spend about 4.5 billion rand ($307 million) on sustaining its South African businesses. Those platinum assets have a lifespan of almost four decades, even though no fresh capital spending is anticipated, the CEO said.

While the company builds up its production of PGMs in the U.S. in 2019, it also wants exposure to the battery-materials industry within two years, Froneman said.

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