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Actionable news in SBGL: SIBANYE GOLD LIMITED,

These Catalysts Point To A Bright Future For Sibanye Gold

Sibanye has reached a wage deal with 3 of 4 unions, but the threat of strike by the unreasonable AMCU still looms as Sibanye ends wage talks.

Sibanye's foray into the platinum industry through a series of bargain acquisitions is extremely promising, creating both long-term value and medium-term cost-saving synergies between companies.

Sibanye has taken significant measures to develop its own generating capacity and become independent of the unreliable public utility, which cuts power by up to 20% during frequent power shortages.

The weak South African Rand has essentially acted as a hedge against a decline in the Dollar/gold price, keeping the Rand/gold price at an acceptable level.

The price of gold will most likely drop after the Fed hikes rates, which could create a great entry opportunity for long-term gold bulls.

Sibanye Gold Ltd. (NYSE:SBGL) is a South African gold mining company and the world's 9th largest gold producer. With a $1.2bn market cap, a low 11x P/E ratio and a current annual dividend of ~3.5%, this undervalued titan could potentially offer great returns for investors who are bullish gold in the medium to long term. However, note that it's not without its risks.

A Wage Deal and a Potential Strike

A lot is going on at Sibanye right now, making this a pivotal time for the company. One major development is the recent wage deal and threats of strike from the AMCU, a large miners union.

Sibanye recently made a deal to increase wages ~6% per year for 3 years. 3 of the 4 unions accepted this offer and have ceased threats of strike. These same 3 unions have also made similar deals with Harmony (NYSE:HMY) and AngloGold Ashanti (NYSE:AU). The AMCU, though, which makes up about 42% of Sibanye employees as of October, rejected this deal. They want to increase current pay from R5,700/month to R12,500/month. It's worth noting that at previous pay levels, labor made up about 55% of Sibanye's costs.

Sibanye realized that some AMCU members at their mines were fine with the deal given to the other unions, so management decided to apply the new wage deal to all employees, regardless of union affiliation. The company then walked away from negotiations with the AMCU as their demands were extremely unreasonable.

Above: An AMCU rally in October (Source: Sibanye Employee)

This deal still doesn't alleviate the risk of strike, which would drastically slow production. The AMCU staged a record 5-month strike last year in South Africa's platinum industry, so a prolonged strike would not be unheard of. The AMCU initially agreed to hold off on strikes during negotiations, but now that they are over, it remains to be seen whether they're satisfied with the wage increase Sibanye is implementing.

Sibanye's Platinum Acquisitions

Sibanye has made multiple acquisitions recently in an attempt to enter the South African platinum industry, scoring a couple of bargain deals as record low platinum prices, coupled with a historic 5-month strike by the AMCU, devastated platinum companies. These deals together would make Sibanye the world's 5th largest platinum producer.

Anglo American Platinum's Rustenburg Mine

Sibanye recently made a R4.5bn ($331m) deal to purchase Anglo American Platinum's Rustenburg mine. This is Sibanye's first move into the platinum industry.

Looking at Anglo American Platinum's financial statements, the Rustenburg...


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