Westonaria - Sibanye Gold is considering using its dollar holdings to buy bullion mines abroad as a weaker rand raises the cost of domestic acquisitions, the company's CE Neal Froneman said on Friday.
The rand has fallen nearly 27 percent against the dollar in the last year, sending valuations in local gold mining firms sky-rocketing and making them pricey compared to similar assets abroad.
South African gold mining companies pay their costs in the local currency, but earn their profit in dollars.
“The rand gold price is at all-time highs and it doesn't seem to make too much sense to buy South African gold assets,” Froneman told Reuters in an interview.
Sibanye could also buy up coal, platinum and base metals mines in South Africa if bargains become available following a sharp drop in commodity prices over the last 18 months.
“It all depends on the price of entry into those commodities,” Froneman added. “If they are not doing well then surely you can make low-cost entries.”
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Sibanye last year bought mines owned by Anglo American Platinum and Aquarius Platinum in South Africa's platinum belt.
Froneman said it could leverage coal assets to reduce its power costs, by supplying coal to power stations in return for cheaper electricity. Power accounts for 20 percent of its costs.
State-owned power utility Eskom is currently in the process of asking the energy regulator to approve further electricity tariff increases to cover the cost of running its turbines.
At next week's annual Mining Indaba in Cape Town, investors will be hoping to find solutions to tackle rising costs, labour unrest, job cuts, and regulatory uncertainty.
The mining industry contributes around 7 percent to Africa's most industrialised economy.
The gold mining industry went through tough wage talks with unions last year and the platinum industry is set to begin pay negotiations in mid-2016 following a record platinum strike during similar talks two years ago.
Mining minister Mosebenzi Zwane said last week that around 32 000 workers could lose their jobs in the mining sector due to low commodity prices, adding to national unemployment which is currently stands above 25 percent.
Spot gold prices fell more than 10 percent last year, while platinum slid 25 percent.
“The regulatory environment is investor unfriendly, organised labour is not conducive to investment and energy costs spiralling,” Froneman said. “Until those three things are fixed up, you are going nowhere.”
REUTERS