“It’s similar to the removal of mine boundaries in the gold industry 10-15 years ago,” says Froneman. “There are things like concentrators, surface infrastructure, and surface tailings that are not being optimised. Group overhead can be shared. So there are numerous ways to achieve economies of scale in terms of being able to reach the R800m a year in savings.”

Stakeholders will be pleased to hear that this will not involve cutting jobs. “Where we find ourselves today [in South Africa] it is all about saving jobs. No jobs will be lost at the lower end of the organisation. So it’s important in terms of what’s right for South Africa,” says Froneman.

Nor does it deviate or affect Sibanye’s declared strategy of paying returns to investors via dividends. “This deal is synergistic, it is value accretive, and it is consistent with our dividend strategy,” says Froneman, who was very complementary of the Aquarius management team led by CEO Jean Nel. “All-in-all it’s an attractive, cash generative business, and Jean and his team have been ahead of the game.”

Eoin Treacy's view

Buy low and sell high is easy in theory and difficult in practice. The siren call to pay record high prices for assets when prices are surging often leaves companies unable to make the same purchases when prices are depressed. In fact many find themselves in the opposite situation and end up selling once expensive assets at deep discounts. The Chinese were highly active in 2009 and were major contributors in the subsequent recovery but on this occasion have been largely absent as domestic factors have led to a change of emphasis. 

Catching a falling knife is obviously a risky endeavour and we do not yet know whether the current bounce in precious metal prices will transform into more than a reversionary rally. However, the sector is more interesting today, following a major decline, than it was in 2011. Management teams that complete due diligence and conclude they can make money at current prices or even somewhat lower should offer a high beta play on metal prices in the event that anything other than a worst case scenario evolves.  

Sibanye (Est P/E 16.32, DY 1.03%) has found at least near-term support in the region of $4 and a sustained move below that level would be required to question potential for additional higher to lateral ranging. 

Zijin Mining (Est P/E 17.16, DY 4.46%) has also been active in acquiring attractive assets at reasonable prices, not least its stake in Pretium Resources. The share continues to firm from the HK$2 area which represents the upper side of the previous base formation. 

Meanwhile platinum will need to break the medium-term progression of lower rally highs, currently near $1050 to signal a return to demand dominance beyond the short term.