It’s hard to keep a uranium bull down.
And as Sibanye-Stillwater repositions itself for the future, CEO Neal Froneman’s attachment to the metal has re-emerged.
Sibanye has begun edging its way into so-called green metals as it looks to life after the platinum group metals (PGM) boom of the past three years. It has record profits under its belt, thanks to strong production and sky-high PGM prices — normalised earnings for the first half were R24.4bn and a dividend of R8.5bn was declared.
Earlier this year, the company announced an investment agreement with the Keliber lithium project in Finland as well as plans to acquire the Sandouville nickel refinery in France, with further deals still likely in 2021.
While new assets are clearly on the cards, Sibanye’s strategy also looks to build on its established metals recycling and tailings retreatment business as well as on its uranium assets.
A self-described supporter of nuclear energy, Froneman says Sibanye sees "new horizons" for the company in this regard. "We see the uranium market moving into deficit over five to 10 years, and then long-term price forecasts exceeding $60 a pound," he said at last week’s results presentation.
Uranium now trades at about $33 a pound but has failed to breach the $40 mark since 2014.
It’s certainly not the first time Froneman has been bullish on the metal.
In 2005, he merged the uranium-rich assets of Afrikander Lease with Toronto-based Southern Cross Resources to form internationally listed Uranium One. Shareholders enjoyed a thrilling ride up to mid-2007, when the uranium price peaked at over $140 a pound. But it began to fall sharply thereafter, and in 2008 Froneman shocked the market when he suddenly stepped down as CEO.
He maintains it was a disagreement about strategy, though the impending failure of the flagship Dominion uranium mine was said to have played a role at the time. Shareholders blamed Froneman for their losses.
Dominion was ultimately closed and later sold to Gupta-owned Oakbay Resources and renamed Shiva Uranium.
In an interview with Business Day TV last week, Froneman said: "Many people made good money out of my uranium." In fact, he said, Uranium One is owned today by the Russians and is one of the biggest uranium companies in the world.
"Yes, we did have some failures. But those failures were ultimately due to the uranium price going from $146 a pound down to the teens." But as a green metal, it’s blue skies ahead now for the price, he says.
Luckily, SA is among the most uranium-rich countries, and even more fortuitously, Sibanye already owns a chunk of those reserves.
Between Beatrix West and the Cooke mine, Sibanye has 100-million pounds of shallow-surface uranium resources, so extracting them is "absolutely the right thing to do", says Froneman.
According to Sibanye, while the Cooke mines have been on care and maintenance for four years, the plan was always to exploit their uranium potential. Beatrix West, meanwhile, was once a uranium mine, and as its gold production is set to end in about five years, it becomes "just very logical" to transition it.
Nedbank analyst Arnold van Graan says the push into green metals and uranium is about positioning Sibanye for the future. "If you look at the evolution of Sibanye, it started as a gold company. It bought uranium assets and more gold assets. It then started getting into PGMs in SA, after which it bought the US PGM assets. Finally it bought Lonmin. Each of those was a new angle that kept the investment case and optionality alive."
But, Van Graan argues, uranium isn’t likely to be top of mind for cutting carbon emissions — even if it should be.
"There seems to be three major reasons for this. These are the cost, which is probably the biggest challenge; the complexity; and the long lead times."
Still, it’s clear that the glory days, especially for palladium and rhodium, which are the two most lucratively priced metals in the PGM basket, won’t be here forever. Sibanye says palladium prices could drop back to $1,000 an ounce after 2025 as automakers begin switching back to much cheaper platinum. That means prices will more than halve from their present levels of about $2,400 an ounce. Platinum, on the other hand, is still stuck at about $1,000 an ounce, where it traded five years ago.
While green metals may well be the next growth path for Sibanye, it’s not entirely clear how it’s going to work, says Van Graan, with talk from Sibanye that it may separately list its uranium assets.
"I think the intention of the strategy is good. It’s keeping the investment case going and looking to the future, and ensuring that [the company does not] fall in a heap when the commodity cycle turns. But it does add complexity and risk, and becomes harder to follow."
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