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Neal Froneman on Sibanye-Stillwater's growth in battery metals

May 17, 2022 | 07:45 AM |

With a long career in gold and platinum-group-mining to draw on, Sibanye-Stillwater chief executive officer Neal Froneman tells Andrea Hotter about the major miner’s strategy to expand further in the battery metals business.

As he was about to achieve his childhood dream of becoming a pilot in the South African Air Force, the future chief executive officer of Sibanye-Stillwater paused for thought. He had already signed the permanent force forms to formally join the military and was, he said, “dead set” on being an air force pilot.

“Then my dad said to me, ‘What happens if you fail a medical one day in the future?’,” he told Metal Market Magazine. “It was one of the few times I really listened to my parents, and thought, ‘That’s a good point.’ After getting some exposure to the mining industry and having done an officer’s course, I decided actually I must fly for fun, and make mining my career,” he added.
That is exactly what happened as Froneman managed to continue his interest in flying and remains a fixed-wing pilot as well as a helicopter pilot to this day.
He had grown up in Johannesburg in a middle-class family, which included a sister and a half-sister. Froneman was, he confessed, “quite naughty” as a child, but still managed to do well academically, aided by the realization early-on that he needed to work hard.
“I was probably one of the top mathematics and science students at our school, which resulted in me getting a bursary to study engineering,” he said. Engineering suited Froneman, who was very mechanically orientated. “If I ever dreamt about doing something different to flying, it would have been designing planes or fast cars. I used to build models of car engines too,” he said.

A career in mining

He pivoted to mining because Johannesburg-headquartered Gold Fields, one of the world’s largest gold mining companies, awarded him the best bursary while studying at the University of the Witwatersrand. After graduating with a BSc in mechanical engineering in 1981, Froneman went to work for Gold Fields, where he instantly enjoyed the people-side of mining.
“I loved the very strong camaraderie, plus the responsibility – it’s not too different to the military because the associated risks, if not well understood, can be lethal,” he noted. That, combined with the associated engineering, meant he was sold on mining as a career.
He started at Gold Fields as a sectional engineer, and then became a project manager for the Northam Platinum project on the Western Bushveld Complex, which the company had acquired in 1986. Having started in gold, the project marked Froneman’s first exposure to platinum.
He eventually moved to work at South African miner Gencor, then headed by industry rainmaker Brian Gilbertson, where he spent the next ten years or so. It was a fascinating period. At Gencor, Froneman had a ringside seat for some of the decade’s most important merger and acquisition activity; Gilberton’s divestment and industry rationalization strategy forever changed the face of South African mining. Part of that included Gencor’s opportunistic acquisition of Royal Dutch Shell’s metals and mining business and then the mining division of Billiton, minus its downstream metal operations.

Froneman was working at a more advanced level in projects when he joined Gencor, and shortly afterwards was appointed as a consulting engineer for Evander, in Mpumalanga province. He next moved into business development for Gencor Engineering and Technologies, predominantly in west Africa, which is when he realized he had a real interest in the entrepreneurial side of the job.
The role gave him exposure to a diversified set of assets across the region. “I was hired at Gencor to work initially on a titanium project, which only happened much later, so when I started I was then given a coal project. After that I was pulled into gold, and then into west Africa to work on iron ore and do consulting for Ashanti Gold,” Froneman said.
By now, he had embarked on a Bachelor of Accounting Science degree in his spare time at the University of South Africa; he completed the course over several years, graduating in 1989. He also successfully completed his Mechanical Engineer’s Certificate of Competence in 1984 as well as his Mine Manager’s Certificate of Competency a decade later.
During his tenure at Gencor, he also worked with another industry leader, Bernard Swanepoel, following him to Harmony Gold, where the company developed “some very modern management practices for the mining industry,” Froneman said.

“At Gencor I was exposed to multi-skilling; at Harmony it was much more developing a commercial and team approach, a more business-like approach to the management of mineral resources, and that was a nice period. We transformed Harmony from a single asset to a significant mining company,” he added.
It was then, Froneman noted, that he felt the urge to strike out alone. “I had a great need to go and do my own thing,” he said. So, he began by getting involved in smaller start-up opportunities.
In April 2003, he was appointed CEO of Aflease Gold Limited, which, through a series of reverse take-overs, became Gold One International Limited in May 2009. He was primarily responsible for the creation of Uranium One Incorporated from the Aflease Gold uranium assets. During this period, he was CEO of both Aflease Gold and Uranium One until his resignation from Uranium One in February 2008.
Using the word ‘One’ in a company’s name became something of a personal brand along the way. “More recently, someone pointed out that my surname, Froneman, includes ‘one’ too!” he laughed. “I didn’t make that link until more recently,” he said.
It is a brand he continued when he created Sibanye. That process began when Gold One attempted to buy Driefontein from Gold Fields, but “couldn’t get the transaction done because there would have been substantial tax leakage if we had,” Froneman said.
“I then became aware that Gold Fields was going to going to unbundle its GFI Mining South Africa subsidiary, which included the Driefontein, Kloof and Beatrix mines, and I volunteered to lead that process for them. With the support of my Gold One shareholders and management team, we created Sibanye Gold,” he added.
And the name Sibanye? “It is Xhosa for, ‘We are one,’” Froneman smiled.
In 2013, Froneman became CEO of Sibanye Gold, whose common shares and American depository receipts were listed on the JSE and the New York Stock Exchange, respectively, and the company embarked on a strategy of organic and acquisitive growth.
“To some extent, Sibanye-Stillwater now is like Gencor was back then: a dynamic company with smart people that took on risk and is where it is today because of the things Brian Gilbertson did,” Froneman said.
Gilbertson’s approach has always had an influence on Froneman, who said he still likes to meet with him when possible. “I never worked directly for Brian – I was four or five steps below his level but watching him operate and seeing how he ran the company was incredible,” he said. Similarly, he admired Swanepoel, “A very good person to work with,” Froneman noted.
“But there was no real mentor – I had to do it myself. None of my family was in mining; they were all accountants,” he added.

Sibanye-Stillwater’s journey

Froneman is fast to point out the role of his team in building Sibanye-Stillwater into the company it is today. “It’s easy to talk as though I did everything, but it really was a team effort. There are some exceptional people at Sibanye-Stillwater, people who’ve been with me a long time; they’ve got the scars and have been successful with me as well!” he said.
The first task facing Sibanye Gold, as it was initially defined, was to differentiate the company from its gold-sector peers.
“Ultra-deep level gold mines don’t interest anybody in the investment market and when you start with companies of this size, you’ve got to make them relevant and compete across the globe. The first thing we did was to find a way to make the assets stand out – we positioned Sibanye Gold as an industry-leading dividend payer, and that theme has followed us through even to today; we became a benchmark dividend payer in the gold sector while we were predominantly a gold company,” he said.
Sibanye Gold moved to acquire the Cooke operations from Gold One in 2013 and Wits Gold, which owned the Burnstone project, in 2014.
Having put Sibanye Gold on a successful path, cutting costs and establishing it in the capital markets, Froneman said the company realized its operating skills could potentially be used in South Africa’s platinum group metals (PGMs) sector, which he recalled was fragmented, suffered from a lack of leadership, and had many organized labor and safety issues.
“I think many established companies struggled to lead in the difficult South African environment. As new kids on the block, we could stand our ground. We could work to tame the unions and also take on government, which was really obsessed with retrospectively changing the empowerment rules. So, we stood our ground,” he recalled.
In 2016, Sibanye Gold’s first step in PGMs was to buy Aquarius Platinum Limited, which included its interests in the Kroondal mine and the Platinum Mile retreatment facility, both in the Rustenburg area of South Africa, as well as the Mimosa joint venture with Impala Platinum in Zimbabwe. Six weeks later, the company acquired Anglo American Platinum’s Rustenburg operations, located right next door to the Aquarius operations.

According to Froneman, it was risky: the acquisitions came at a low point in the PGMs cycle. “The only way we could do the deals without risking the entire business was to ensure the synergies we could extract would cover the operating costs in a low-price environment,” he said.
South African PGMs miner Lonmin was always the first target, he noted, but the company could not get traction for the deal with its management. Instead, it turned its sights on Stillwater Mining Company, based in Montana in the United States, and eventually acquired the PGMs producer in May 2017.
The $2.2 billion transaction was a significant achievement for the company: it not only constituted the largest PGMs transaction globally in over a decade, but it also facilitated the geographic diversification of Sibanye Gold’s operational portfolio to the Americas.
“We internationalized the company, acquiring the largest primary producer in the world but also bringing a large recycler as a secondary business into the fold,” Froneman noted.
Subsequently, the company was rebranded and formally began trading as Sibanye-Stillwater in August of that year. The company had still continued to pursue Lonmin, but realized that the PGMs miner was in trouble and was likely to get cheaper. It was not until June 2019, after several other deals, including the purchase of a stake in gold tailings retreatment firm DRDGOLD Limited and a $500 million stream financing deal with Wheaton International, that the Lonmin deal materialized.
“We did the Lonmin deal with our eyes wide open. But Lonmin typically pays for itself every four to five months now,” Froneman added.
By then, Sibanye-Stillwater was a giant in the world of PGMs production and still a major gold producer. “We spent 47 billion Rand ($3.4 billion) on M&A that took Sibanye-Stillwater from zero to number one. Of course, it was at a low in the PGMs cycle so we created enormous value – today our market cap is around $12 billion, so you can see the uplift,” Froneman said.

Battery metals too

When the company set its sights on diversifying into PGMs, it completed in-depth analysis forecasting the evolution of the automotive sector, which is the predominant consumer of PGMs for catalytic converters for car-exhaust systems.
It was then, Froneman said, that the company could see that battery electric vehicles (EVs) were going to make substantial inroads in the automotive sector and identified the value-creation opportunity of getting into battery metals. It also took a long-term view of sustainability, predicting environmental, social and governance issues would continue to gain in importance as companies worked to meet the climate change goals of the 2015 Paris Agreement, he noted.

“When you combine the value opportunity of moving into battery metals with the ability to create a green metals company, you have a class-leading portfolio and profile in modern society,” he added. This work accelerated when Sibanye-Stillwater acquired SFA Oxford to provide in-depth market intelligence on battery materials and precious metals for industrial, automotive and smart-city technologies.
There were delays that happened in implementing the strategy, including the Covid-19 pandemic as well as a wage strike in the gold division, whose unions opposed the sale of Lonmin to Sibanye-Stillwater.
“We had challenges – it wasn’t plain sailing. We really had to work hard to get the battery metals assets, and to get them in the right way,” Froneman said. “We did two years of careful consideration of what the most likely battery chemistries would be, and last year we started implementing our strategy, completing five large transactions,” he added.
These included a 30% stake in the Keliber lithium project in Finland, slated to start in 2024; the acquisition of the Sandouville nickel-processing facility in France in 2021 from Eramet; a 50% stake in the Rhyolite Ridge lithium-boron project in the United States, expected to start in 2024; and a 19.99% interest in New Century Resources, a tailings management and rehabilitation facility at Century Zinc in Australia, which also has a stake in the Mt Lyell copper mine in Tasmania, which has been on care and maintenance for several years.
Investment was also made in Verkor, a developing French EVs battery manufacturer, which will be supplied with battery metals mined and processed from assets in which Sibanye-Stillwater has a stake. It is part of Sibanye-Stillwater’s new innovation and market development fund, BioniCCube, and plans to build a 16 GWh Gigafactory in France’s Dunkirk region.
Another deal would have seen Sibanye-Stillwater acquire Brazilian mining operations Atlantic Nickel and Mineração Vale Verde (MVV) from Appian Capital Advisory, but the sale and purchase agreements (SPAs) were terminated by Sibanye-Stillwater in January, resulting in Appian initiating a legal dispute between the two companies when it served a Notice of Claim.

Future growth

According to Froneman, the company has plans to grow its battery metals business further, banking on the ongoing growth of the electric power train and electromobility. “We are focused specifically on lithium and nickel; we think cobalt and manganese are going to be thrifted out of battery chemistries,” he said. “Of course, uranium has come back into favor as a baseload green-energy metal, and we have it as a by-product of gold. Then the two other metals that are interesting to us and which would complement our portfolio are copper and silver,” he noted.
“Over-encompassing this is it all has to be done creating value for all stakeholders; if you don’t, you won’t get their support to proceed,” he added.
Working to reduce the mining company’s own carbon footprint might take a little longer – more than 90% of energy in South Africa comes from coal. The company has, Froneman acknowledged, a lot of work to do, but Sibanye-Stillwater is targeting carbon neutrality by 2040. “We believe we’re at the front end of making a difference. We talk about the ‘grey elephants’ – significant global events – and climate change and the angry planet is a grey elephant in that if we don’t all do something about it, it’s going to have devastating consequences,” he said.
The company has implemented a digital-first policy, with remote working across the group except for at mine sites and operations, and no conferences attendance unless it is virtual. “We’re making a stand against carbon emissions by severely limiting our travel. It’s far more focused and demanding, and there are no beers with delegates afterwards unless you go to your own fridge!” he laughed.
The company plans to replace its reliance on coal with renewable energy installations such as photovoltaic and wind. It will also see a decreasing energy-intensity profile when its ultra-deep level mines come to the end of their lives.
After this rapid growth, Froneman said Sibanye-Stillwater has earned its right to do value-creative M&A. “We can do it at quite an aggressive rate – people think we’re cookie monsters, we eat whatever comes along!” he said.
The company considered 70 potential transactions last year and it proceeded with five. “We do a lot of analysis, and as long as we can demonstrate value, we’ll do it. We have a very strict capital allocation model – we won’t compromise dividends or become overly indebted, but M&A plays an important part of our value creation goals,” Froneman added.

Investors on ESG

As governments and regulatory authorities around the world step up requirements on companies to meet sustainability goals, so too has the investment community. Froneman noted that this has become particularly evident in Sibanye-Stillwater’s dealings with shareholders and investors, and rightly so. “You’re not even on the playing field as a business if you don’t pass the first-stage tests in environmental, social and governance (ESG),” he said.
According to Froneman, investors are reasonable on environmental issues: “They don’t expect change overnight, but if you’ve got no plans you will not be embraced by investors,” he said. Similarly social aspects, including community relations and safety, are very important in South Africa, especially following the Marikana clashes a decade earlier, he noted, referring to the deaths of 34 miners during a strike.
“There’s also a lack of service delivery in South Africa, which has some of the hugest inequalities in the world, so we have our work cut out for us. And then of course, governance is non-negotiable. But if you don’t tick those boxes, your meeting [with investors] comes to an end. It’s only after that you begin to talk about profitability, strategy and so on,” he added.
Froneman said that operating in South Africa can at times be tough. “I’d be misleading you if I did not say that it’s a difficult place to operate,” he noted. “But having said that, we know how to prosper in that environment, and we wish for nothing more than for that environment to change and improve,” he added.
“The lack of leadership in South Africa – political and across government and municipalities – is creating real hardship for the country’s citizens which then ultimately becomes our problem and makes us less competitive – the inefficient labor system and radical approach from unions has to be managed. We say this with a view to seeing South Africa improve and we’re very willing to play our role,” he said.
Overseas original equipment manufacturers (OEMs) have meanwhile also adopted a strong focus on ESG, Froneman noted. “There isn’t a single car company that doesn’t have safety or sustainability at its heart and there’s no way they will buy products that aren’t green because its green smithing if they do. Automotive companies have their own high ESG standards and are particularly worried about social issues in certain regions, in South Africa, and environmental issues in other areas,” he added.
Froneman said the company worked with automotive firms to create a more sustainable catalyst which substituted palladium with (for???) platinum. “There was very significant strategic benefit in working with the OEMs – it created sustainability, provided longer term solutions, and was good for business in general,” he noted.
The company carried that work through into the battery metals space, a relatively new area for it and made complicated by virtue of evolving battery chemistries and a more polarized geopolitical environment. “We designed our batteries strategy to have partnerships, but we also recognized that the world was becoming very polarized. Now you have Russia invading the Ukraine and we have distinct lines between the east and the west,” Froneman said.
The company decided to focus its partnerships in the European and North American ecosystems, therefore avoiding a reliance on being a contract miner for end users and in an attempt to be more pandemic-resilient, he noted.
“There will be more grey elephants like Covid in the coming decades and therefore we’re working in ecosystems that don’t expose us to a government locking down its country and being unable to supply us. You need to work with like-minded people and become pandemic resilient,” he added.
It is in this context that the company acquired Sandouville and was then invited by the French government to participate in its battery energy strategy, which in turn led to the creation of BioniCCube and the stake in Verkor.
According to Froneman, not having sought funding from the French, or any other, government has added to the company’s credibility. “We’re in a very fortunate position – we have a strong balance sheet, strong cash flows, and as such we can play a very meaningful role in reversing climate change,” he added.

Raw materials constraints

A constraint on the production of raw materials essential to the energy transition, such as nickel, lithium and copper, is a “new wave” impacting the sector and is likely to act as a restraint on the adoption of EVs, Froneman said.
“God forbid, we don’t want car companies trying to run mines, just like we wouldn’t want miners to run car companies – it would be an absolute mess. But car companies are desperate to secure raw materials and fast-thinking companies like Tesla have recognized their growth will be constrained by not having the metals they need,” he told Metal Market Magazine.
“The constraints are not the factories, the car plants, the technology – it’s the metals. That’s why we have a much more conservative view of the rate at which battery EVs will make inroads – it’s not as quickly as most people think,” he said.
It is already leading to “smart collaboration” between stakeholders, including long-term offtake deals and investments in battery producers by OEMs, something that has already been prevalent in PGMs, he noted. “Collaboration is here to stay because everyone is going to be constrained by a lack of metals. Even if you fast-track a mining project, it’s probably a full ten years at best from identifying a potential resource to drilling it, doing the mine design, and building the mine and plant. So even if some cities have banned internal combustion engines (ICEs) by 2025, it’s not going to happen that quickly – it will take longer,” he said.
Froneman identified another factor weighing on the pace of electric vehicle adoption: cost inflation. “The sudden inflation in nickel and other metal prices is going to make battery raw materials uncompetitive. It’s another delay. I’m really positively disposed towards electric power trains, it’s absolutely the way to go. But the ICE will get better and be around longer because there are just not enough battery raw materials to provide for all the consumption that is required,” he added.
He tipped lithium and nickel as having further price upside despite their current gains, and said platinum, iridium and uranium also have strong potential. Palladium, however, faces some headwinds, he noted, while hydrocarbon-based commodities like coal and oil will be challenging over time.

If the current inflationary environment leads to higher interest rates, which in turn dampens economic growth, Froneman said he could see gold benefiting as a store of wealth. “There are a lot of factors creating a perfect storm for recession, including slowing consumption in China amid its zero-tolerance approach to Covid-19, which in turns means gold will come into its own,” he added.
This is despite ESG-related concerns over gold as an investment, which Froneman said will be eliminated through the use of tracking and tracing technologies, providing investors with confidence that the precious metal is being responsibly produced. “The greenest platinum and gold being produced comes from tailings retreatment and recycling, which demonstrates why we’ve embraced recycling and are increasing our exposure to tailings retreatment. We will market the gold from tailings retreatment as some of the greenest in the world,” he added.
Sibanye-Stillwater is one of the biggest PGMs recyclers in North America and plans to expand that business in Europe. “We fully intend to grow our recycling activities from PGMs into batteries. We’re working with Verkor and other partners on battery recycling – we have a lot of hydrometallurgical skills which can transfer to recycling,” Froneman said.
“A big part of recycling is collection, and the very same collection mechanisms will apply to batteries. While there are not enough EVs being scrapped at end-of-life yet to provide sufficient batteries for recycling, the battery manufacturing process does provide huge opportunities for recycling,” he added.

Highs and lows

While his journey to date has had many ups, there have also been downs, with safety incidents the worst of the lows, Froneman said. “We’ve had some tough years. Although we’ve shown a constantly improving safety trend, we still have too many fatalities and that’s a low,” he acknowledged.
“The highs in my view are the progress the company has made, the development of the people in the company; they’ve transitioned and developed into really first-class, experienced business executives,” he said. “Our PGMs strategy was also a major high. But it does feel like every year is a new high,” he added.
Froneman said if he had one piece of advice for new starters to the mining world, it would be to come along for the ride but work collaboratively with your colleagues. “In mining, you’ll either make a lot of money or lose a lot of money, there’s no in-between, so when you make a lot of money, enjoy it. But if you don’t recognize the role of people and the role of teamwork then don’t join the mining industry. It’s only successful when it’s based on teamwork,” he added.
Unsurprisingly, Froneman’s love of mechanics plays center stage when it comes to his spare time. “One side of me loves motor racing, fast cars, fast boats, fast toys, flying helicopters and airplanes,” he said. “I also love music, although wish I could play the keyboards and drums better than I do – I enjoy any good-quality music, from jazz to pop; that’s maybe my softer side,” he laughed.
He’s also an expert in long-range precision shooting, out as far as a couple of kilometers. “I enjoy doing the ballistics and reloading – that’s one of my current hobbies,” he added.

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