Sibanye Gold Ltd.'s recent changes to its South African portfolio were part of a wider strategy to manage and limit political risk within the jurisdiction, CEO Neal Froneman told S&P Global Market Intelligence on Nov. 30 on the sidelines of the Mines and Money conference in London. However, he said the company will not leave the country.
"We need a regulatory environment that is clear and the rules are not changed retrospectively. Until we have that, we have got to hold back on capital expenditure on longer-term projects," Froneman said. "But to make it clear, we are not leaving South Africa. We've got 72,000 employees there that we have a responsibility to. As you know, unemployment is a huge issue [in the country]."
In a deal worth 1.3 billion South African rand, the company recently agreed to exchange gold processing assets and tailings storage facilities for a 38% stake in DRDGold Ltd.
Just weeks earlier, Sibanye had announced that about 2,025 employees will be retrenched following the shutdown of the Cooke gold mine in South Africa, while it said operations at Beatrix West will continue as long as they are profitable. This follows Sibanye's acquisition of Stillwater Mining Co., first announced in late 2016, through which it entered American soil for the first time.
"You have a duty as a manager to manage risks and if they are beyond your control ... you have to consider how else you manage, in our case, the political risk. That was very much part of the thinking with the acquisition of Stillwater," Froneman said.
"Of course, there were other aspects to it that were related to jurisdiction and the fact that it produced primarily palladium. There were commercial aspects, but it was important to us to diversify our risk under the current circumstances [in South Africa]."
South Africa's mining industry continues to feel the pain of controversial revisions to the mining charter that Mineral Resources Minister Mosebenzi Zwane sought to implement despite warnings by the Chamber of Mines that it could destroy the industry altogether. It was estimated that South African miners lost 51 billion rand in market value in mid-June when the charter was enacted, after being published earlier in the year.
Just this week, a court hearing on the mining charter initially scheduled for mid-December was moved to February 2018, prolonging legal uncertainties for producers and investors alike.
"This is not a good thing as it increases the time of uncertainty," Froneman said.
On the upside, he said the postponement might allow for changes in ministerial appointments as a result of the elective conference of the African National Congress, or ANC, which is due to be held in mid-December in Gauteng.
"The noise around the ANC elective conference will be behind us; we will have a new ANC president, and depending on who it is, you might see changes in ministerial appointments, which is exactly what is needed in opening the door and creating the environment to resolve the issues [around the mining charter]."
