Sibanye may delay projects
Sibanye Gold may delay growth projects because of the strength of the rand, while it looks to keep as much debt as possible off its balance sheet by raising its rights issue to $1.3bn towards buying Stillwater Mining.
Sibanye Gold may delay growth projects because of the strength of the rand, while it looks to keep as much debt as possible off its balance sheet by raising its rights issue to $1.3bn towards buying Stillwater Mining.
Sibanye caught the market by surprise at the end of 2016, announcing a $2.2bn cash takeover bid of Montana-based Stillwater, the largest source of platinum group metals outside SA and Russia.
Sibanye CEO Neal Froneman said in December the company would raise between $750m and $1bn in a rights issue, but on Friday said it could raise as much as $1.3bn from shareholders, depressing its share by as much as 7% on Friday.
The final decision on the size of the rights issue would be based on market conditions, commodity prices and exchange rates at the time and what shareholders wanted, Sibanye said. “Sibanye believes that increasing the equity component would be prudent in the current strong rand environment, allowing it to maintain a strong balance sheet.”
Sibanye said net debt to earnings before interest, tax, depreciation and amortisation would fall to 1.9 times if it asked shareholders for $1.3bn compared with 2.5 times if it went for the $750m option and two times for $1bn.
Analysts have said Sibanye was paying a “full price” for Stillwater, with a 23% premium to ensure shareholders in the North American mine would accept the offer.
Sibanye was feeling the negative effects of a stronger rand against the dollar at its gold and platinum divisions and ongoing strength would erode profit margins at those businesses.
“In light of these factors and the likely impact on cash flow, management is re-evaluating its current growth capital expenditure plans,” it said.
The projects coming under review were the Burnstone gold mine in Mpumalanga, a project to treat the Upper Group 2 reef at the Rustenburg platinum mines and the West Rand Tailings Retreatment Project to extract gold and uranium from old dumps near Carletonville.
“Certain projects may be deferred or placed on care and maintenance until commodity prices sustainably improve, and/or exchange rate volatility has subsided,” Sibanye said.