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Sibanye to acquire US platinum miner for R30bn

Sibanye CEO Neal Froneman

Sibanye CEO Neal Froneman

Photo by Duane Daws

9th December 2016

By: Martin Creamer

Creamer Media Editor

  

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JOHANNESBURG (miningweekly.com) – Precious metals mining company Sibanye Gold has entered into a definitive agreement to acquire all of the outstanding common stock of Stillwater Mining Company of the US for R30-billion ($2.2-billion).

The $18-a-share offer represents a premium of 23% to Stillwater’s prior day closing share price, and 20% to Stillwater’s 20-day volume-weighted average closing share price.

The board of directors of Stillwater has unanimously determined and resolved that the transaction is advisable, fair to and in the best interests of Stillwater and the stockholders of Stillwater, and has recommended that the stockholders of Stillwater vote in favour of it.

Sibanye’s management believes that the transaction is value accretive and represents a transformational opportunity to create a premier, global precious metals mining company, with a balanced portfolio of gold and platinum group metals (PGM) assets, at a favourable point in the commodity cycle.

The deal is expected to enhance Sibanye’s asset base and create a globally competitive South African mining champion by adding to its portfolio two low-cost, low-risk, steady-state, producing PGM mines.

It also expands Sibanye’s portfolio into high-grade reserves that support more than a quarter century of mine life, plus organic growth potential through extensive regional resources.

It provides Sibanye with a mine-to-market PGM business that has a metallurgical processing complex.

A PGM recycling operation is also part of the deal, along with the potential provision of further operational optimisation.

It positions Sibanye’s platinum division further down the global cost curve, enhances cash flow to sustain the dividend and provides lower-cost access to global financing.

Sibanye CEO Neal Froneman is most impressed with the workforce at Stillwater.

“We believe that our two organisations have a strong cultural fit, with mutual priorities of employee health and safety, the environment and the communities in which we operate,” Froneman said.

Stillwater CEO Mick McMullen expressed confidence in Sibanye continuing to be a world-class steward of the US operations and partner to local Montana communities.

Development of Stillwater’s Blitz and Lower East Boulder projects offers brownfield expansion opportunity.

Sibanye’s newly formed US holding company will merge into Stillwater, with Stillwater becoming an indirect wholly-owned subsidiary of Sibanye.

Sibanye has obtained a $2.7-billion bridge loan commitment from Citi and HSBC to fund the transaction and repay Stillwater’s $0.5-billion convertible debentures.

The transaction is expected to close in the second quarter of 2017, after which Sibanye expects to raise new debt and at least $750-million in equity through a rights issue, with the objective of maintaining its dividend policy and preserving its long-term financial flexibility.

Consistent with its long-term strategy, Sibanye is targeting a net debt-to-2017 earning before interest, taxes, depreciation and amortisation ratio of no greater than 1.5 times by the end of fiscal year 2017.

Stillwater is the only US miner of PGMs and the largest primary PGMs producer outside of South Africa and the Russian Federation.

Located in Montana, Stillwater’s operations consist of the Stillwater and East Boulder underground mines, the Blitz project and the Columbus metallurgical complex.

Located in the J-M reef, the world’s highest-grade PGM deposit, the underground mines have been in operation since 1986 and 2002.

The two mines are expected to produce between 535 000 oz and 545 000 oz of two element (2E) PGM in fiscal year 2016, at a total cash cost net of credits of $430/oz to $455/oz. Each mine has its own milling and concentrator infrastructure on site.

Development of the Blitz project is expected to be completed in early 2018 and ramp up to full production of between 270 000 oz and 330 000 oz 2E PGM by 2021/2022, with lower cash cost an ounce than currently at the Stillwater mine and East Boulder mine.

Stillwater’s proven and probable reserves consist of 39.4-million tonnes of ore with an average grade of 15.6 g/t, or 19.9-million ounces of contained 2E PGM.

The proven and probable reserves are 78% palladium and 22% platinum, and support a mine life of over 25 years.

The Columbus metallurgical complex, which is capable of providing smelting and refining processes for mine concentrates, produces a PGM-rich filter cake that is shipped to a third-party precious metal refinery.

In addition, the complex facilitates recycling operations for various materials containing PGM that are provided by third-party suppliers, principally automotive catalytic converters. The complex has continued to expand its
recycling volumes, with a record 175 000 oz of PGM processed in the third quarter of 2016.

Stillwater has a long history of constructive labour relations and support for local community development.

Sibanye’s two largest shareholders Gold One International and Public Investment Corporation, which in aggregate represent 29% of Sibanye’s issued share capital, have confirmed their support.

The net asset value of Stillwater is $916-million and the profit attributable to Stillwater for the nine months ended September 30, 2016 is $4-million.

Citigroup Global Markets Limited and HBSC Bank plc acted as financial advisers to Sibanye, while Qinisele Resources acted as corporate adviser. ENSAfrica served as South African counsel to Sibanye, while Linklaters LLP served as legal counsel to Sibanye in the US.

Bank of America Merrill Lynch acted as financial adviser to Stillwater, while Jones Day and Holland & Hart acted as legal counsel.

Stillwater also owns the Marathon PGM-copper deposit in Ontario, Canada, and the Altar porphyry copper-gold deposit located in the San Juan province of Argentina.

The company's shares are traded on the New York Stock Exchange.

Last month Sibanye's Sibanye Rustenburg Platinum Mines took over the ownership, control and management of the Rustenburg Operations from Anglo American Platinum’s (Amplats’) Rustenburg Platinum Mines, which include the Bathopele, Siphumelele, Khomanani, Thembelani and Khuseleka mining operations, as well as two concentrating plants, an on-site chrome recovery plant, the Western Limb Tailings Retreatment Plant and associated surface infrastructure, for at least R4.5-billion.

Earlier this year, it also completed the acquisition of Aquarius Platinum, which owns stakes in the Kroondal platinum mine, in Rustenburg, and the Mimosa joint venture with Impala Platinum, in Zimbabwe.

Long-serving Sibanye VP Robert van Niekerk has been appointed CEO of Sibanye’s platinum division following the stepping down of Jean Nel.

Edited by Creamer Media Reporter

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