Sibanye in Lonmin buyout

SOUTH Africa’s Sibanye-Stillwater has agreed to buy Lonmin for about £285-million (R5.14-billion) in an all-share deal that drove shares in the troubled Londonlisted platinum miner up by more than a fifth.

Lonmin, the world’s thirdbiggest platinum producer, has been battling weak global platinum prices and soaring operating costs in South Africa, shrinking the company’s market value by 98% in the past five years.

After the announcement, Lonmin’s shares jumped 23%, while shares in Sibanye-Stillwater, which will become the world’s second-largest platinum producer on completion of the deal, fell 5% in Johannesburg.

“This is a bailout deal for Lonmin,” Nedbank precious metals analyst Leon Esterhuizen said.

“It makes for a good match, but it doesn’t resolve oversupply of the PGM [platinum group metals] industry.”

Global platinum prices are trading around their lowest levels since early last year, under pressure from bloated supply and declining demand from the automotive industry.

Sibanye chief executive Neal Froneman said: “The flexibility inherent in the larger regional PGM footprint will create a more robust business, better able to withstand volatile PGM prices and exchange rates.”

Under the offer, Lonmin shareholders would receive 0.967 new Sibanye-Stillwater shares for each Lonmin share, the firms said.

Following completion of the deal Lonmin shareholders would hold about 11.3% of the enlarged group.

“While in some way I am sad, I am sure as hell that this is the right thing for the sustainability of the company,” Lonmin chief executive Ben Magara said.

Under Sibanye’s plans, Lonmin would put all of its older mines on care and maintenance, which means operations will stop but are kept in a condition to resume in future.

The plan involves cutting 12 600 jobs in the next three years, with a further 890 jobs at risk, a Sibanye presentation showed.

Lonmin now employs about 35 500 people.

The revised mine plan assumed “lower-for-longer” platinum prices, the presentation said.