Sibanye wants to raise $2bn

Through rights offer, debt

SIBANYE Gold yesterday said it planned to raise $1 billion (R13.36bn) through a rights offer and another $1bn in debt, most likely bonds, to fund its acquisition of US-based platinum and palladium miner Stillwater Mining.

The company said it had revised the amount from the $1.3bn it announced in February, charging that the new estimate was optimal given the market conditions.

It said it also planned to raise about $1bn in debt and that the two tranches of capital would be raised by the end of June this year.

Sibanye senior vice-president for investor relations, James Wellsted, said the rand’s recent weakness against the US dollar was among the factors which influenced the decision to revise equity component from $1.3bn to $1bn.

A weaker rand improves gold miners’ margins, because they get their revenues from gold sales in the US currency, while their costs are in rands.

When it announced its plans to buy Stillwater, a tier-one producer of platinum group metals, for US$2.2bn in December last year, Sibanye said it would raise a minimum of $750 million.

Feedback

But in February it raised the amount it planned to raise to $1.3bn, saying it had taken into consideration the strong rand environment, spot precious metals prices and in response to feedback from certain shareholders regarding the impact of these on the availability of the company to achieve a more desirable financial leverage ratio.

At the time Sibanye said, in a strong rand environment, it was prudent to increase the equity component in the deal in order to maintain a strong balance sheet.

Wellsted said the recent decision by rating agencies Fitch Ratings and S&P Global Ratings to downgrade South Africa’s sovereign credit rating to sub-investment grade reinforced the decision.

“We believe that with the downgrades, the structure of the exchange basis has weakened and is unlikely to go back to R12 (to the US dollar),” he said.

The South African Reserve Bank last week said the credit downgrades and the recent changes to the cabinet could put pressure on the rand.

Sibanye said it would continue to explore other sources of long-term capital, including debt instruments such as bank debts and bonds.

“The balance of this funding is expected to be completed before the end of (this year),” the company said.

Sibanye said it had cleared the final US regulatory hurdle in its bid to acquire Stillwater, after the Committee on Foreign Investment into the US (CFIUS) unconditionally approved the deal.

CFIUS describes itself as an inter-agency committee of the US government that reviews the national security implications of foreign investments in US companies.

“All regulatory conditions required for the implementation of the transaction have now been satisfied,” Sibanye said.

The deal, which will see Sibanye lay its hands on a portfolio of low-cost assets with growth potential, was still subject to the approval of Sibanye and Stillwater shareholders.

Sibanye shareholders will vote on the transaction at a general meeting scheduled for Tuesday next week.

Sibanye Gold shares dropped 5.9 percent on the JSE yesterday to close at R33.31.