African Mining January 2023 | Page 43

BUSINESS •

He noted six selection criteria for new company investments . Quality – both all-in cost and life – and jurisdiction were high on that list as they impact the valuation of a company . Griffith added that this assessment applied to a major , high grade , copper / gold porphyry project Gold Fields was looking at developing , but which is located in Argentina , noting that in his experience , “ The best grade is always in the worst place ! So , we will have to do the kinds of things that we did when we invested in Chile , for example , get the right stability agreements in place with government with the assurances that one can get one ’ s money out , otherwise one cannot invest .” He added that partnering is also a means of reducing risk and sharing outlay in these instances .

He noted that the Gold Fields asset in Chile has developed from an exploration find within the company and the plan is to deliver a mine at 4 500m in the Andes – a goldmine that generates all-in , sustaining costs at USD550 / ounce . “ We are going to have one of the best margin gold mines on the planet . And this is six months away from being delivered .”

Similarly , he noted that over time , the Gold Fields assets in Australia have delivered more than four times the value initially paid for them . Gold Fields has also been successful in Ghana , and although South Deep has taken a while , it is now generating money .

In summary he noted , “ South Africa is not the toughest place to work , we ' ve got issues here that we do not gloss over , and I think all of us have a responsibility to address those issues .”

Global diversification strategy across commodities Froneman explained the Sibanye-Stillwater green-orientated strategy – “ We are proudly South African competing on the international field . Our vision is to create superior shared value by building a green metals company .” He noted that the company ’ s PGM portfolio is where the company wants it to be , but is looking to grow its gold portfolio , which acts as an insurance policy in a large exposure to industrial metals . Battery metals is a new ecosystem driven portfolio in the company to complement its PGM business . The company is also looking to expand recycling and tailings retreatment businesses with one of the biggest recycling businesses in PGMS in Europe and is expanding into battery metals recycling and retreatment too , while it is a controlling shareholder in DRD-Gold locally .

The company ’ s strategy , however , he noted , must be seen within the context of the global trends of deglobalisation / multipolarity . He expanded on this saying , “ There are distinct divides between the East and the West that are developing , and everything is in short supply . We have to become pandemic resilient ,” – equating the Russian-Ukraine War to an additional pandemic . The ecosystems the company has chosen to work in are predominantly in North America and Europe and in the battery metals - locally and regionally , with an approximate 50 years of PGM LOM in SA .

Apart from the right timing and the usual IRRs ( internal rate of returns ) and NPVs ( net present values ), Froneman pointed out that the company ’ s investment criteria included the fact that the investment must be complimentary to the company ’ s current strategy , it must add value and , more importantly now than ever before , ESGs are a huge consideration – “ There ' s no point in buying assets that don ' t help improve your carbon profile and accelerate your ability to get to carbon neutrality .”

With over 90 % of the company ’ s revenue generated in South Africa and the country ’ s current infrastructure and regulatory concerns , “ the next consideration for us is the jurisdiction – investments must improve the quality of the portfolio from a geographical diversity point of view ,” he said . Sibanye-Stillwater is still domiciled in South Africa – and there is no doubt that the country is not a favourite destination from a domicile point of view said Froneman , especially in the light of the negative perceptions Eskom and ‘ expropriation without compensation ’ have created . However , he emphasised one very important point , “ In the field we are focusing in , it is becoming apparent in the context of current deglobalisation – we talk of multipolarity – South Africa is unique in its ability to work with the East and the West . American listed companies are actually almost prevented from working with China , and soon to be India and of course Russia . South African seems to go down a middle road where we can deal with all those countries – ok , perhaps not Russia – but this is a distinct advantage in the battery metal sector , which we will look into and use as a competitive edge .”

Froneman noted that “ Every acquisition we ' ve made has had a real return . The PGM acquisitions have been a stunning success . They ' ve paid for themselves in two to three years – on the local front , Sibanye-Stillwater , which was expensive – in four years and Lonmin pays for itself every few months .

“ The benefits of the strategy and the value acquisition trajectory in investments overseas have increased . Although there is no update on the returns on investments we have now made in lithium in North America , lithium in Finland and the nickel refinery in France , we have achieved critical mass in those areas . And again , that ' s a bit like the Zimbabwe example that Nico gives , there are unseen benefits . It is easy to quantify the success or failure or return on an investment , but the landscape is much bigger , providing more value creation opportunity with a footprint now in North America , in Europe , and even in Australia . It has allowed us as a company to achieve critical mass , which means our organisational structure has grown to a regional one . And I suppose the ultimate from a mining company perspective is where your organisational structure becomes commodity driven , because then you ' re really big in each one of those commodities . But that footprint , that capacity that you ' ve established in the US and in Europe , allows another springboard of value creation opportunity without diluting the focus of your operators in those various regions . I have no doubt that it has improved our risk profile and made a good return on investment , and it has positioned us for the next phase of growth .”

In conclusion , he noted , “ South Africa is a challenging jurisdiction . It has got good resources and good geological potential . Clearly , we know how to prosper here , I just wish it was not so difficult !

“ The grass is definitely not greener on the other side . However , when one is a deep level gold or platinum miner , and one moves offshore , the South African mining experience puts you in a really good position to work in jurisdictions where the challenges are less .” •

References :

1 . Go to the African Mining website for more information on the termination of the agreement with Yamana by Gold Fields : https :// www . africanmining . co . za / 2022 / 11 / 15 / gold-fields-terminatesarrangement-agreement-with-yamana /