Sibanye Gold Ltd (ADR) (NYSE:SBGL) wants to buy a gold-producing asset

Sibanye Gold Ltd (ADR) (NYSE:SBGL) wants to buy a gold-producing asset


Sibanye Gold Ltd (ADR) (NYSE:SBGL) the top producer of the metal from South African mines, wants to buy a gold-producing asset this year to add to platinum purchases. Surging share prices make a deal in its home country unlikely.

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The asset would have to make a “material difference” to Sibanye’s current output, with production of at least 200,000 ounces of gold a year, Chief Executive Officer Neal Froneman said in an interview after the company’s annual general meeting Tuesday. Any acquisition would have to be generating cash to help pay dividends, he said.

Froneman, 56, is on the lookout for purchases after turning around three aging gold mines in South Africa’s Witwatersrand Basin following Sibanye’s spinoff from Gold Fields Ltd. in 2013. Last year, Sibanye agreed on two platinum acquisitions — Anglo American Platinum Ltd.’s Rustenburg operations and Aquarius Platinum Ltd., both northwest of Johannesburg.

“We remain optimistic about doing a gold transaction before the year-end,” Froneman said. “But gold valuations are proving to be challenging from an acquisition point of view. There’s been a substantial re-rating in the equity prices of gold companies.”

Sibanye Equity Analysis

Sibanye Gold Ltd (ADR) (NYSE:SBGL) opened trading today as $13.11 and is trading in the range of 12.81-13.43 today. Sibanye’s current market cap stands at $3.00 billion.

Sibanye is currently covered by 4 Wall Street analysts.  The mean target price is $18.13 according to First Call.  This presents a solid upside to the current price of the equity.  The Mean Recommendation sits at 2.0 which is based on 1 Strong Buy, 2 buy and 1 hold ratings.

The most recent analyst actions consisted of Macquarie downgrading the stock on March 15th and JP Morgan initiating coverage with an upgrade rating back in September.

The current quarter EPS revenue estimates of 2.09B.  Sales are expected to drop at a 70.50% rate.

Corporate Profile

Sibanye Gold Limited owns and operates underground and surface gold operations in South Africa. The company holds interests in the Driefontein Operations covering an area of approximately 8,561 hectares; the Kloof Operations covering an area of approximately 20,100 hectares; and the Cooke Operations located in the West Witwatersrand region, as well as in the Beatrix Operations covering an area of approximately 16,821 hectares in the Free State province of South Africa. As of December 31, 2014, it had proved and probable gold reserves of approximately 28.4Moz; and probable uranium reserves of approximately 102.5Mlb. The company was incorporated in 2002 and is based in Westonaria, South Africa.