South Africa's Sibanye Gold to Buy Stillwater Mining for $2.2 Billion
December 09 2016 - 5:10AM
Dow Jones News
JOHANNESBURG—South Africa's Sibanye Gold Ltd. said Friday that
it plans to buy U.S. palladium and platinum miner Stillwater Mining
Co. for $2.2 billion, the company's first foray outside of Southern
Africa and the latest bold move to diversify beyond gold
mining.
The purchase is Sibanye's third platinum acquisition since late
2015 and would make the company, which until last year was solely a
gold miner, the world's third largest platinum producer. The move
is a vote of confidence in platinum in addition to a strategic
diversification away from the often difficult operating environment
in South Africa.
Sibanye has a long and storied history in the mining industry.
It was spun off in 2013 from three aging South African mines held
by Gold Fields Ltd., a company founded by colonial pioneer Cecil
John Rhodes.
In a press release Friday, Stillwater, of Littleton, Colo.,
which has two mines in Montana and Colorado, said its board
approved the deal. The $18-a-share bid represents a 23% premium to
Stillwater's closing price on Dec. 8. The two largest shareholders
of Johannesburg's Sibanye have confirmed their support of the
deal.
Sibanye Chief Executive Neal Froneman said in a call on Friday
that the company plans to raise new debt and equity through a
rights issue sometime in the next year of at least $750
million.
Sibanye's pivot from gold to the white metal at a time when
prices were low for both was prescient. Prices for platinum have
risen around 6% this year to around $942 an ounce, while gold is up
around 11% at $1,170 an ounce.
Mr. Froneman turned around the company's gold operations by
reducing inefficiencies, partly by cutting jobs and restructuring
management in addition to changing the culture at the mines.
Stillwater is an attractive acquisition because it generates
cash, with processing facilities and a recycling operation that
should give Sibanye strategic insight into the market, Mr. Froneman
said. Sibanye believes the transaction will improve earnings a
share.
Mr. Froneman said Sibanye remains committed to South Africa,
despite difficulties, such as aging infrastructure, unreliable
electricity and often disruptive labor unions, "This should not be
seen as a first step in exiting South Africa."
Sibanye, which means "we are one" in Nelson Mandela's native
Xhosa language, agreed in September 2015 to pay at least 4.5
billion South African rand ($288.5 million) for an old mine in the
platinum town of Rustenburg.
The mine—which was owned by Anglo American Platinum Ltd., or
Amplats, a majority-owned unit of globally-diversified miner Anglo
American PLC—was one of Amplats's most labor-intensive assets.
Less than a month after announcing its Rustenburg purchase,
Sibanye offered $294 million for nearby mines owned by Australia's
Aquarius Platinum Ltd., which has operations in South Africa and
Zimbabwe. The two deals, plus the Stillwater purchase are expected
to turn South Africa's largest gold producer by output into one the
world's top four platinum producers as well. The latter deal gives
Sibanye a foothold in Zimbabwe, home of the world's second-largest
platinum reserves after South Africa.
Write to Alexandra Wexler at alexandra.wexler@wsj.com
(END) Dow Jones Newswires
December 09, 2016 04:55 ET (09:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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