Johannesburg - Sibanye Gold said it may seek to almost
double the size of a planned share sale to R17 billion, or 60 percent of its
market value, to reduce the amount it has to borrow in its takeover of
Montana-based platinum and palladium miner Stillwater Mining.
South Africa’s biggest gold producer said in December in
announcing the surprise $2.2 billion deal for Stillwater that it planned to
raise at least $750 million for the purchase, which will transform Sibanye into
the world’s third-largest palladium producer.
After meeting investors to discuss the deal, Sibanye
received “feedback that shareholders prefer to minimize the financial leverage
associated with the transaction, with certain shareholders expressing
support for an increased equity issue,” the company said in a statement Friday.
CEO Neal Froneman has been on the hunt for acquisitions
the last three years as its resources at aging gold mines in South Africa
become depleted and are unable to sustain the company’s dividend over the
longer term. Sibanye has expanded into platinum-group metals by purchasing four
mines in Rustenburg, South Africa last year.
Read also: Sibanye plunges on R30bn US deal
The Stillwater deal will be its first purchase outside of
its home country and the biggest international takeover by a South African
mining company since 2001. Sibanye has said it hopes to complete the takeover
by the second quarter of this year.
‘Strong rand’
The desire to reduce debt incurred by the transaction
stems from “the current strong rand environment,” and “spot precious metals
prices,” Sibanye said. The company is typically hurt by a strong South African
rand in which it pays costs and a weak US dollar in which its receives revenue.
While the rand has gained 19 percent against the dollar
in the past year to 13.4211 at 10:19 a.m. in Johannesburg, it’s still 16
percent weaker than three years ago.
The stronger rand also means Sibanye may defer or idle
some development projects in South Africa as a margin squeeze hurts cash flow.
The company is reviewing its planned 2017 spending on the
Burnstone gold operation, the UG2 project at its Rustenburg platinum operation,
and the tailings-retreatment project in the Gauteng province’s West Rand area,
which involves going through mine-waste dumps for overlooked metals.
Project review
“Management is re-evaluating its current growth
capital-expenditure plans,” Westonaria, South Africa-based Sibanye said in the
statement. “Certain projects may be deferred or placed on care and maintenance
until commodity prices sustainably improve,” and exchange-rate volatility has
subsided, it said.
Sibanye’s gold production was 1.5 million ounces in 2016,
about 2 percent lower than its target due to the planned closure of Cooke 4
shaft and power outages resulting from storms. All-in sustaining costs at R452 000
a kilogram ($1 007 an ounce) were lower than expected.
Restructuring its platinum operations in South Africa by
reducing costs and merging shared services is progressing according to plan,
the company said.
Sibanye fell 3.2 percent, the most since January 25, to R30.17
at 10:45 a.m. in Johannesburg. Gold declined 0.2 percent to $1 213.19 an ounce.