Africa’s top fund manager and investor confirms interest in South African Gold M&As

*South Africa’s Public Investment Corporation, managing workers’ pensions discloses any consolidation must also consider economic benefits to the shareholders and broader interests of the country’s economy

Isola Moses | ConsumerConnect

In expressing interest in the gold metals market, Africa’s biggest fund manager and key investor in South African gold companies has stated that any consolidation in the sector must benefit the country as well as shareholders.

Mdu Bhulose, Portfolio Manager for Mining and Resources at the money manager, said that the Public Investment Corporation (PIC), which manages 1.91 trillion Rand ($128 billion) of mainly South African Government worker pensions, has a broader mandate than purely shareholder returns on investment (RoI), agency report said.

Bhulose noted that the firm as well considers potential job losses, the welfare of communities in which mining companies operate as well as the interests of the broader South African economy.

President Cyril Ramaphosa of South Africa

According to Portfolio Manager, these considerations will affect the way the firm assesses proposals for investments in the market.

His comments come amid speculation that Johannesburg-based Anglogold Ashanti Limited and Gold Fields Limited could be takeover targets for foreign buyers because of their relatively low valuations.

Neal Froneman, the Chief Executive Officer (CEO) of South African gold and platinum miner Sibanye Stillwater Limited, has said the three companies should combine to avoid being bought by companies based elsewhere.

Bhulose said of the PIC’s approach to potential takeovers in a recent interview: “Is this going to be a value destructive deal for the country?

“We look at returns, but also what impact it will have for all other stakeholders.”

The PIC is the biggest shareholder in AngloGold, holding 11.9%, and the second-largest in Gold Fields with 9.6%. In Sibanye, its 15.9% holding is the biggest of any investor, according to report.

Newmont Corporation, the world’s biggest gold miner by market value, has a price-to-earnings ratio that’s more than double both AngloGold and Gold Fields, highlighting the discount at which the South African producers trade.

While AngloGold and Gold Fields have shifted their focus to more profitable operations elsewhere in Africa, Australia and the Americas, they retain their primary listings on Johannesburg’s stock exchange.

Froneman said in an interview earlier March 2021 that “if you trade at a discount, somebody that trades at a premium is going to buy you.

“AngloGold, Gold Fields and even us, we are targets for North American producers.”

Gold Fields, founded by Cecil Rhodes in 1897, runs South Deep mine, its sole remaining asset in South Africa.

AngloGold, which emerged from a mining empire created by Ernest Oppenheimer a century ago, sold its last mine in South Africa last year and has been mulling moving its primary listing elsewhere.

The combination of the three companies envisaged by the Sibanye CEO could save about $160 million in corporate costs and create synergies between Gold Fields and AngloGold’s Ghanaian operations, according to analysts at RMB Morgan Stanley.

The deal could be compelling to investors if Sibanye offers a premium to acquire the companies, the analysts said.

Bhulose stated: “If the answer is that you will get more from the assets when you put them together than if they are apart, certainly there is merit to that transaction.

“We need to evaluate what management teams can prove on paper in terms of creating value, and how they can manage these businesses to deliver more value.”