Sibanye will pay more for bond

Sibanye Gold is paying more than it would have done on a $1bn bond because of the introduction of a new investorunfriendly Mining Charter, sovereign downgrades by ratings agencies and uncertainty in the mining sector.

Sibanye, SA’s largest producer of domestic gold and a major platinum group metal producer, has raised $2bn via a rights issue and now the twotranche bond towards repaying $2.65bn of debt incurred to buy Stillwater Mining in the US for $2.2bn in cash.

The cost of the bond was pushed higher by last Thursday’s release of the Mining Charter, with a number of investors in the US, where CEO Neal Froneman was on a road show last week to promote the bond issuance, raising concerns about the contents of the charter, which will add costs to operating mines in SA.

“There was definitely an impact on the cost. A number of investors said directly to us that the added uncertainty to our cost of business in SA was a risk and they wanted a higher rate on the bonds,” said Sibanye spokesman James Wellsted.

The Chamber of Mines earlier this week said the market capitalisation of JSE-listed mining companies fell by R50.69bn on Thursday because of the charter, which bumped up black equity ownership to 30% from 26% within a year, demanded that new prospecting rights be 50% plus one black owned and that black investors be debt free within 10 years within the ownership structures with firms writing off outstanding debt.

Foreign investors were particularly worried about the introduction of a 1% deduction from the revenue line to be paid to black partners on new mining rights, with concerns this put lenders down the pecking order and could limit cash flows to repay debt and the coupon on the bonds, Wellsted said.