Sibanye Gold plan­ning to buy Lit­tle­ton miner

The Denver Post - - BUSINESS - By Dow Jones Newswires

jo­han­nes­burg» South Africa’s Sibanye Gold Ltd. an­nounced Fri­day that it plans to buy Lit­tle­ton-based pal­la­dium and plat­inum miner Still­wa­ter Min­ing Co. for $2.2 bil­lion, the com­pany’s first foray out­side of South­ern Africa and the lat­est bold move to di­ver­sify be­yond gold min­ing.

The pur­chase would be Sibanye’s third plat­inum ac­qui­si­tion since late 2015 and would make the com­pany, which un­til last year was solely a gold miner, the world’s third-largest plat­inum pro­ducer. The move is a vote of con­fi­dence in plat­inum in ad­di­tion to a strate­gic di­ver­si­fi­ca­tion away from the of­ten dif­fi­cult op­er­at­ing en­vi­ron­ment in South Africa.

Sibanye has a long and sto­ried his­tory in the min­ing in­dus­try. It was spun off in 2013 from three ag­ing South African mines held by Gold Fields Ltd., a com­pany founded by colo­nial pi­o­neer Ce­cil John Rhodes.

In a news re­lease is­sued Fri­day, Still­wa­ter, which has two mines and a smelter in Mon­tana, said its board ap­proved the deal. The $18-a-share bid rep­re­sents a 23 per­cent pre­mium to Still­wa­ter’s clos­ing price Dec. 8. The two largest share­hold­ers of Jo­han­nes­burg’s Sibanye have con­firmed their sup­port of the deal.

Sibanye CEO Neal Frone­man said dur­ing a con­fer­ence call Fri­day that the com­pany plans to raise new debt and eq­uity through a rights is­sue some­time in the next year of at least $750 mil­lion.

Sibanye’s pivot from gold to the white metal at a time when prices were low for both was pre­scient. Prices for plat­inum have risen about 6 per­cent this year to about $942 an ounce, while gold is up about 11 per­cent at $1,170 an ounce.

Frone­man turned around the com­pany’s gold op­er­a­tions by re­duc­ing in­ef­fi­cien­cies, partly by cut­ting jobs and re­struc­tur­ing man­age­ment in ad­di­tion to chang­ing the cul­ture at the mines.

Still­wa­ter is an at­trac­tive ac­qui­si­tion be­cause it gen­er­ates cash, with pro­cess­ing fa­cil­i­ties and a re­cy­cling op­er­a­tion that should give Sibanye strate­gic insight into the mar­ket, Frone­man said. Sibanye be­lieves the trans­ac­tion will im­prove earn­ings a share.

Frone­man said Sibanye re­mains com­mit­ted to South Africa. De­spite dif­fi­cul­ties such as ag­ing in­fra­struc­ture, un­re­li­able elec­tric­ity and of­ten dis­rup­tive la­bor unions, “This should not be seen as a first step in ex­it­ing South Africa,” he said.

Sibanye, which means “we are one” in Nel­son Man­dela’s na­tive Xhosa lan­guage, agreed in Septem­ber 2015 to pay at least $288.5 mil­lion for an old mine in the plat­inum town of Rusten­burg.

The mine — which was owned by An­glo Amer­i­can Plat­inum Ltd., or Am­plats, a ma­jor­ity-owned unit of glob­ally di­ver­si­fied miner An­glo Amer­i­can PLC — was one of Am­plats’s most la­bor-in­ten­sive as­sets.

Less than a month af­ter an­nounc­ing its Rusten­burg pur­chase, Sibanye of­fered $294 mil­lion for nearby mines owned by Aus­tralia’s Aquarius Plat­inum Ltd., which has op­er­a­tions in South Africa and Zim­babwe.

The two deals, plus the Still­wa­ter pur­chase, are ex­pected to turn South Africa’s largest gold pro­ducer by out­put into one the world’s top-four plat­inum pro­duc­ers as well.

The lat­ter deal gives Sibanye a foothold in Zim­babwe, home of the world’s sec­ond­largest plat­inum re­serves af­ter South Africa.

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