12 000 Lonmin jobs still at risk
Despite R5bn takeover offer
SIBANYE-Stillwater yesterday flagged that 12 000 jobs at Lonmin would continue to be at risk despite making a firm offer to take over the world’s third-biggest platinum producer in a R5 billion deal.
Sibanye-Stillwater said the jobs remained at risk over the next three years, regardless of whether the transaction was implemented, amid the prevailing weak platinum price environment and the ageing Generation One shafts which would be placed on care and maintenance in 2019. Lonmin employs 32 000 people.
Sibanye-Stillwater chief executive Neal Froneman said the jobs risk was a reality that needed to be faced.
“That has nothing to do with Sibanye. That is what we need to put on the table, and we need to deal with it,” he said during a telephone conference to analysts and journalists yesterday.
Froneman added that a further 800 jobs, including 320 contractors, were likely to be lost due to the merger and synergies between the two companies.
The merger is expected to elevate Sibanye to the world’s second-biggest platinum and palladium producer. It will also transform Sibanye into a leading mine-to-market producer of platinum group metals (PGM) in South Africa.
The deal comes as 60 percent of the platinum industry is still battling losses amid the low price environment and rising costs. Lonmin chief executive Ben Magara said the deal was a solution to the company’s financial crunch.
“Lonmin has an enviable mine-to-market business with great mining assets, projects and process technology and a resilient workforce. Despite this, Lonmin continues to be hamstrung by its capital structure and liquidity concerns,” Magara said.
Cash-strapped Lonmin approached shareholders for a R5bn rights issue in 2015 following the labour unrest that culminated in the Marikana massacre, while community protests for jobs disrupted production in May.
Earlier this month, Lonmin announced a delay of the release of its annual results, citing that management was dealing with a review of the operations that was expected to have an impact on the debt covenants.
Speculation about the merger went into overdrive earlier this month when the Public Investment Corporation (PIC) – which manages R1.9 trillion of assets on behalf of government pensioners – announced it had increased ownership in Sibanye-Stillwater to 11 percent.
Ratings
In terms of the deal, each Lonmin shareholder will be entitled to 0.967 new Sibanye-Stillwater shares for each share they own.
Both boards approved the deal with Sibanye-Stillwater scheduled to approach a ratings agency about the takeover.
Sibanye-Stillwater said it expected total pre-tax run-rate synergies of R1.5bn a year by 2021, averaging approximately R1.280bn a year from 2021 to 2032, as a result of the acquisition.
Once the transaction is finalised, Lonmin will be delisted in London and its London office will close.
Sibanye, the gold and platinum producer, began its acquisition spree with a takeover of Aquarius Platinum, and the acquisition of Anglo American Platinum’s Rustenburg operations in 2015.
Seleho Tsatsi, an investment researcher at Anchor Capital, said the takeover was not a complete surprise as there were synergies that could be realised given, among other things, the close geographic nature of the operations to each other.
“Lonmin definitely needed this as the balance sheet was coming under increasing pressure at current platinum group metals prices,” Tsatsi said. “You could argue that this ensures Lonmin’s ounces will stay in the market, which is probably not good for PGM prices.”
Tsatsi said Lonmin and Sibanye-Stillwater were looking at a 12 600 employee headcount reduction over three years.
“It will be important to watch how that progresses,” he said.