Lon­min deal could be a game-changer

Finweek English Edition - - Marketplace -

The Com­pe­ti­tion Com­mis­sion in mid-Septem­ber rec­om­mended that Sibanye-Still­wa­ter’s plan to buy out the troubled Lon­min (for just over $380m) be ap­proved (with cer­tain con­di­tions).

Sibanye-Still­wa­ter is cur­rently the largest in­di­vid­ual pro­ducer of gold from South Africa and is also one of the 10 largest gold pro­duc­ers glob­ally.

Should the Com­pe­ti­tion Tri­bunal ap­prove the Lon­min trans­ac­tion, it would cre­ate the world’s num­ber-two plat­inum pro­ducer, and one of the world’s big­gest sources of plat­inum group met­als (PGMs).

Key as­sets in the Lon­min takeover are its con­cen­tra­tors, smelters and re­finer­ies.

Sibanye-Still­wa­ter' CEO,

Neal Frone­man, pointed out that fol­low­ing the pro­posed trans­ac­tion, the com­pany would be “a lead­ing mine-tomar­ket pro­ducer of PGMs in South Africa”. Over the past cou­ple of years, Sibanye-Still­wa­ter also ac­quired Aquar­ius Plat­inum, as well as An­glo Plat­inum’s Rusten­burg op­er­a­tions.

Sibanye-Still­wa­ter, with op­er­a­tions in South­ern Africa and in the US, came un­der pres­sure this year for the amount of fa­tal ac­ci­dents at its min­ing op­er­a­tions in South Africa. By July, 20 deaths had been re­ported at its mines.

How to trade it:

Sibanye-Still­wa­ter is trad­ing in its longterm bear trend. Re­tain­ing sup­port at 660c/share has trig­gered a re­cov­ery within the trend. How­ever, it re­cently en­coun­tered re­sis­tance at 975c/share and has pulled back. If sup­port holds above 745c/share, pre­pare to go long above 975c/share. The up­side tar­get would be at 1 180c/share and then at 1 315c/share. Al­ter­na­tively, Sibanye-Still­wa­ter would retest its prior low at 660c/share on con­tin­ued sell­ing through 745c/share. ■ ed­i­to­rial@fin­week.co.za

Neal Frone­man CEO of Sibanye-Still­wa­ter

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