Sibanye’s new deal raises its PGM play

Aquarius acquisition will put it in top five platinum group miners

SIBANYE Gold’s R4bn offer for Aquarius Platinum announced yesterday will catapult it into the ranks of the five biggest global platinum group metals (PGM) miners.

This deal follows a month after an agreement to buy Anglo Platinum’s Rustenburg mines.

Sibanye would bed down its two latest acquisitions in the short term, but as the commodities cycle appeared close to the bottom, there were still plenty of opportunities for more, CEO Neal Froneman said yesterday.

“We will look at opportunities as they arise and as long as they are value-enhancing and accretive at earnings per share level, we will move on them.

“If there is something in the gold or the platinum sector, we will do it, and we have said previously we want to do a coal deal to protect our energy exposure.

“There are other attractive commodities as well.”

Sibanye is offering $0.195 (R2.66) a share in cash for all of Aquarius Platinum’s shares.

It represents a 56% premium to Aquarius’s share price on Monday and 62% premium to its volume-weighted average over the preceding 30 days. Aquarius said its board had resolved to accept the deal, subject to no higher offer being received and an independent expert ruling it to be fair and reasonable.

Aquarius shares had surged 36.47% to R2.32 by close of JSE yesterday, while Sibanye’s were 10.09% higher at R19.74.

Hanré Rossouw, who manages Investec’s South African resources funds, said the offer was opportunistic and drastically undervalued Aquarius.

Sibanye was taking advantage of one of the rare occasions during which platinum was trading at a discount to gold.

As a 13.9% shareholder in Aquarius Platinum, Investec did not support the offer under cur- rent conditions. Aquarius was a well-managed business, sustainable even at current depressed platinum prices, which promised great upside when the market recovered, he said.

It held $72m in cash, which meant Sibanye was effectively buying it for R3bn, not R4bn.

But Investec is also a smaller Sibanye shareholder. From the point of view of Sibanye, it was a good strategic move, Mr Rossouw said. Sibanye planned a smaller, leaner overhead structure and synergies between Rustenburg and Aquarius.

It was positive for labour, as it would not involve any job losses. It would also open up potential in the Zimbabwean resources sector for Sibanye.

Mr Froneman said the acquisition was cash-enhancing, since Aquarius Platinum was cashflow positive.

There were opportunities to realise about R800m a year of synergies through, for example, sharing overhead costs.

With 1.1-million ounces of four PGMs and 1.6-million ounces of gold production a year, Sibanye’s revenue will in future be derived 60% from gold and 40% from platinum.

Aquarius’s Kroondal operation is a 50-50 pool and share joint venture with Anglo Platinum (Amplats). Sibanye head of investor relations James Wellsted said it would make sense to discuss taking over the other 50% of Kroondal, as it was not a priority asset for Amplats.

Mr Froneman said Sibanye had the balance sheet to finance this purchase since it had about $400m of headroom under its revolving credit facility and for the purpose of this deal, had arranged an additional $300m facility from HSBC, which it did not expect to draw down fully.

He said the deal would be funded by cash flows outside the gold business, which was expected to continue generating cash and paying dividends.