Gold One is highly likely to crop up in the future of new gold group‚ Sibanye Gold‚ created by Gold Fields spinning off two of its mines.
Sibanye chief executive‚ Neal Froneman‚ fresh from leading Gold One on an aggressive acquisition trail‚ said on Thursday (29 November) while there are no prearranged deals in place to fold Gold One into the new company‚ it was a logical thing to do in the future.
Froneman was once in charge of the Kloof division‚ which makes up the Kloof Driefontein Complex that together with Beatrix was spun out of Gold Fields into the newly formed Sibanye.
Sibanye is not only seen as a company that will pay good dividends to shareholders but also one that will play a consolidation role in the South African gold sector‚ said Gold Fields chief executive Nick Holland.
Froneman said at current prices and levels of production‚ Sibanye would generate free cash flow of R2bn a year. Some of that would be pumped into the two mines to improve production and access untapped gold resources but there was a strong focus on returning cash to shareholders.
Sibanye would be circumspect when it came to acquisitions as it developed its consolidation strategy‚ he said.
"Contrary to what many of you may be thinking‚ we are not going to be like Pacman and gobble everything up just for the sake of consolidation‚" he said.
Froneman started a new gold company in 2009 with Gold One‚ building one of the first new gold mines near Springs. It added the Cooke shafts and has a range of exploration assets in South Africa and Malawi.
Gold One also spun out its deep-level assets into Goliath Gold. The two companies have split up the Grootvlei assets bought from liquidators after they were mismanaged by Aurora Empowerment Systems.
"Creating a focused mining company is not new to me. Up until now I've had to start off a very small platform. Being able to drive it off a platform like this is unbelievable‚" Froneman said.
Froneman worked closely with Gold Fields exploring the potential of combining that company's tailings dumps with those of Gold One and treating them to extract more gold and uranium.
"I'd been discussing the opportunity with the Gold One board and its major shareholder. I've done this with their support‚" Froneman said.
"The tailings joint venture has huge synergies for Sibanye and Gold One and that could well be a catalyst‚" Froneman said.
"I've built up very good relationships with the Chinese investors and they've invested in Gold One and they back the strategy of a proudly South African gold initiative. I would be silly not to leverage off those relationships as well‚" Froneman said.
"There's clearly a lot of merit in looking at something like that‚" he said of a tie up with Gold One.
Gold One's four Cooke shafts and its uranium plant are close to KDC.
"They are in the same region‚ there are cost and management synergies. It's somewhat obvious‚" Froneman said.
Sibanye comes with net debt of R4bn. It has R2bn of undrawn debt facilities‚ which gives it enough capacity to fund whatever plans it has without resorting to issuing shares.
"If you don't get the dividend yield right you're not going to get that premium rating‚" he said.
Sibanye has an enterprise value of R17bn at a gold price of R400‚000/kg. At R420‚000/kg‚ the enterprise value balloons to R26bn.