Lonmin, Sibanye ‘close to deal’
• Sibanye Gold’s decision to offer $2.2bn cash for US-based company threatens tie-up with Lonmin
Lonmin, the world’s thirdlargest platinum miner, and Sibanye Gold were “just weeks away” from agreeing on a transaction tying their assets together. Two sources close to the matter said talks had been under way for some time when Sibanye suddenly unveiled a $2.2bn cash bid for US-based Stillwater Mining.
Lonmin, the world’s thirdlargest platinum miner, and Sibanye Gold were “just weeks away” from agreeing a transaction tying their assets together.
Two sources close to the matter said talks had been under way for some time when Sibanye suddenly unveiled a $2.2bn cash bid for US-based Stillwater Mining. One of the sources said: “It was so, so close. It was just weeks away from something being finalised.”
Lonmin CEO Ben Magara said: “We never comment on market speculation.”
Sibanye spokesman James Wellsted said Sibanye had spoken to nearly all platinum companies in its quest to grow its platinum business, which now included the whole of Aquarius Platinum and the neighbouring Rustenburg mines owned by Anglo American Platinum.
“We said from the start we were looking at all opportunities in the PGM [platinum-group metals] space. Given our footprint on the Western Limb we were obviously considering opportunities in that area and could have included any of those operations,” he said.
The premium cash deal for Stillwater, the largest primary source of platinum group metals outside SA and Russia, will be funded by a $2.7bn debt and equity package, including a rights issue of between $750m and $1bn, with some analysts pointing to a chunky discount.
“In our view and based on an analysis of rights issues, equity issues and bookbuilds in SA’s gold and PGM market over the past five years, the discount is likely to be in the order of 25%, which we believe will be having a meaningful impact on the value of the future Sibanye share,” Nedbank analysts Leon Esterhuizen and Arnold van Graan said in a note last week.
Sibanye could have bought Lonmin for a fraction of the Stillwater price.
On Friday, Lonmin had a market capitalisation of $584m as one of the strongest gainers on the JSE’s platinum index, rising 20% so far this year and 172% in a 52-week period.
Sibanye CEO Neal Froneman said in December, when the Stillwater deal was announced, that the company, which has strategy to be in the top three of platinum producers, wanted to add a third South African platinum asset to its business.
Whether the Lonmin deal could still be on the cards is unclear given the size of debt Sibanye is adding to its balance sheet to grow its footprint outside SA and Zimbabwe where its platinum assets are based.
A simplistic comparison of market capitalisations ignored the fact that Stillwater had a high-grade ore body and very low production costs, allowing it to ride out the low PGM prices.
Lonmin, on the other hand, had more expensive mines, a much larger workforce, underspending on growth projects for the future and enormous social responsibilities, including the need to build decent accommodation for 11,500 employees, just under half its workforce.