Neal Froneman
Durban - Sibanye Gold shares fell on the JSE on Tuesday despite the company edging closer to realising its Stillwater Mining acquisition with an overwhelming shareholder support of the transaction.

Sibanye fell 3.38 percent to close at R26.88, despite the 81.96 percent backing of the $2.2 billion (R28.56 billion) takeover of the US-based palladium miner.

Sibanye said the transaction, however, remained subject to certain customary closing conditions as well as the fulfilment of major obstacle - the approval by the majority of holders of Stillwaters’ shares.

Chief executive Neal Froneman said the company had done its part and presented shareholders with a transaction that represented a unique and transformative opportunity to acquire world-class, low-cost international platinum group metal (PGM) assets.

“Stillwater offers near-term organic production growth through the Blitz project, further enhancing Sibanye’s asset portfolio and will create in Sibanye, a globally competitive South African mining champion with a unique commodity mix,” Froneman said.

Sibanye initially needed 75 percent in shareholder approval in a transaction that would enable the miner to diversify its mining products and to spread its wings beyond South Africa.

Sibanye said it would fund the Stillwater deal with a combination of debt and new equity. It said the capitalisation of the purchase would be finalised by the end of June.

The deal was initially announced in December last year and expected to be concluded after shareholders had voted on it and the SA Reserve Bank had checked its customary approvals.

At the time, Sibanye said it had obtained a $2.7 billion bridge loan commitment from Citi and HSBC banks to fund the transaction and repay Stillwater’s $500 million convertible debentures and plans to raise $750 million worth of equity capital in a rights issues.

In January, the deal received a major boost when Sibanye said the companies had received early termination of the waiting period under the US’s Hart-Scott-Rodino legislation, meaning that the antitrust condition had been satisfied.

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

Read also: Sibanye gets shareholder OK for R30bn deal

Located in Montana, US, Stillwater’s operations consist of two underground PGM mines (the Stillwater Mine and East Boulder Mine), the Blitz Project and the Columbus metallurgical complex.

On Tuesday, Sibanye said it planned to issue shares to partially pay for the US mine. It planned to raise $1 billion from shareholders and a further $1 billion in debt, most likely bonds, to pay for the acquisition.

Portfolio boost

Jordan Weir, an equities analyst at BayHill Capital, said Stillwater would boost Sibanye’s portfolio with a new diversified make-up of underlying resources aside from their historic focus on gold.

Weir said the strategic move into PGMs, which among others include palladium, rhodium and platinum would will now broaden their ability to add further value for the underlying shareholders as well as giving the company a more meaningful international footprint.

“All in all, their acquisition would potentially provide more opportunity, through international exposure and a broader spectrum of underlying assets, for their shareholders, while mitigating the concentration risk attached to their current gold portfolio,” said Weir.

“As one of only two prominent palladium producers in the world, Stillwater will really help provide Sibanye with an opportunity to unlock global value for its shareholders,” he said.