SIBANYE DIPS 20% ON PLAT­INUM DEAL

CityPress - - Business - JUSTIN BROWN justin.brown@city­press.co.za

Sibanye Gold’s shares dropped nearly 20% on Fri­day as in­vestors fret­ted that the com­pany was pay­ing too much when it an­nounced that it had agreed to buy US plat­inum and pal­la­dium pro­ducer Still­wa­ter Min­ing for about R30 bil­lion.

In­vestors were also con­cerned about Sibanye’s plans to raise more than R10 bil­lion by is­su­ing shares for cash to fund the deal.

At Thurs­day’s close on the JSE, Sibanye was val­ued at nearly R26 bil­lion, but after the news broke, the com­pany saw its mar­ket value cut by 18% to R21 bil­lion be­fore climb­ing to R22 bil­lion. After Fri­day’s share moves, Sibanye’s mar­ket value was R8 bil­lion be­low that of its of­fer from Still­wa­ter.

Sibanye’s shares have been on a road to hell over the past four months as it reached a record high of more than R70 in Au­gust be­fore de­clin­ing by al­most 70% since, partly due to the drop in the gold price.

“The con­sid­er­a­tion rep­re­sents a pre­mium of 23% to Still­wa­ter’s prior-day clos­ing share price and 20% to Still­wa­ter’s 20-day vol­ume weighted av­er­age clos­ing share price,” Sibanye said.

In New York, Still­wa­ter shares shot up 20% ahead of the US mar­ket open­ing on news of the Sibanye takeover.

A lo­cal gold an­a­lyst said that Sibanye’s plan to buy Still­wa­ter was a “sur­prise move” and a “bold move”.

He sug­gested the com­pany might be put­ting too much on its plate given Sibanye’s re­cent ac­qui­si­tions.

Sibanye, which has gold and plat­inum min­ing in­ter­ests, has been rapidly ex­pand­ing into plat­inum min­ing by buy­ing An­glo Amer­i­can Plat­inum’s Rusten­burg mine as well as Aquar­ius Plat­inum. The ac­qui­si­tion of Still­wa­ter will be Sibanye’s big­gest yet, and the com­pany’s first for­eign pur­chase.

An an­a­lyst said that the Rusten­burg mine re­quired a lot of work and Sibanye should have sorted that op­er­a­tion out be­fore look­ing at fur­ther ac­qui­si­tions.

The ac­qui­si­tion will make Sibanye the world’s third-largest plat­inum pro­ducer.

Neal Frone­man, Sibanye’s CEO, said: “The trans­ac­tion is con­sis­tent with Sibanye’s strat­egy of cre­at­ing su­pe­rior value.”

The pur­chase will be funded via a $2.7 bil­lion (R37 bil­lion) bridge loan from Cit­i­group and HSBC, and will pay back $500 mil­lion of Still­wa­ter’s con­vert­ible debt.

Sibanye said the trans­ac­tion was ex­pected to close in the sec­ond quar­ter of next year.

After the deal is com­pleted, Sibanye plans to raise new debt and at least $750 mil­lion by is­su­ing shares for cash.

Still­wa­ter is the only US miner of plat­inum group met­als (PGMs) and the largest pro­ducer of PGMs out­side South Africa and Rus­sia.

The com­pany has two mines – Still­wa­ter and East Boul­der – in Mon­tana in the north west of the coun­try.

The mine also owns the Blitz pro­ject and the Colum­bus met­al­lur­gi­cal com­plex.

“In ag­gre­gate, the two mines are ex­pected to pro­duce be­tween 535 000 and 545 000 ounces of PGMs in fis­cal year 2016,” Sibanye said.

At the end of last year, Still­wa­ter’s re­serves to­talled al­most 20 mil­lion ounces of PGMs.

Sibanye was cre­ated in 2013 when Gold Fields spun off three of its lo­cal gold mines.

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