Investors might be running out of patience with Sibanye Gold Ltd’s colorful chief executive, Neal Froneman.
The South African miner’s stock on Thursday plunged by a record 16 percent after the company said it might consider selling assets, metals streams and — only as a last resort — new shares, if the recent strength in the rand persists.
Sibanye is under pressure to reduce debt after a rapid-fire series of deals that transformed the company from a staid and steady gold producer to a diversified precious-metals miner with both southern African and US assets.
Photo: Bloomberg
The company’s net debt is 2.6 times underlying earnings and almost as high as its current market value.
So far, investors have given Froneman, an industry veteran who earned himself the the nickname “Mr Fix-It” for turnaround successes in the 1990s, the benefit of the doubt.
However, Thursday’s plunge suggests that might not continue forever.
“The biggest issue here is there is too much debt,” Nedcor Securities analyst Arnold van Graan said. “We are seeing a lot of balance sheet risk building up if the rand-gold price stays where it is.”
Rand has gained about 20 percent versus the US dollar in the past three months, as investor optimism builds following leadership changes in the ruling party and South African President Cyril Ramaphosa’s appointment.
Gold priced in rand has declined by about 14 percent in the same period.
Spot gold on Friday fell 0.4 percent to US$1,326.97 an ounce. The precious metal fell 2.1 percent from last week’s US$1,355.44 an ounce.
Copper on Friday fell 0.2 percent to US$7,145.00 per tonne on the London Metal Exchange.
Gold and platinum-group metals are sold in US dollars, and while the majority of Sibanye’s gold and a substantial amount of the group’s costs are denominated in rand, its results and financial condition are affected if there is a material change in the value of the rand.
Sibanye shares on Friday gained 1 percent in Johannesburg.
The plunge in the company’s share price was overdone and it is still generating free cash flow, Morgan Stanley analysts said in a note.
However, the company’s debt level could present a challenge if the rand keeps strengthening.
Sibanye is to look at selling its Cooke gold mine and another loss-making operation, Beatrix West, in South Africa.
INDIA’S SUGAR RUSH
India might export more sugar than previously forecast as higher yields boost supply in the world’s top consumer.
Shipments might total 1.5 million tonnes in the next six to eight months, Indian Sugar Mills Association director-general Abinash Verma said.
Last month, he said that millers were asking the Indian government to abolish a 20 percent export duty so they could attempt to ship about 1 million tonnes in the year that started on Oct. 1 last year.
India exported 1.66 million tonnes of sugar in 2015-2016 and about 46,000 tonnes in 2016-2017, according to the association.
Global sugar prices have tumbled about 33 percent in the past year on a global surplus as production increases in Europe and India.
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