File picture: Itumeleng English/African News Agency (ANA) Archives
JOHANNESBURG - Sibanye-Stillwater said yesterday that it had secured a R6.5billion upfront cash payment from Canada-based pure precious metals streaming company, Wheaton Precious Metals International, in return for selling a portion of gold and palladium production from its US operations.

The decision to forward sell a portion of the company’s production has been on the cards as one of the options to allay jitters about the company’s piling debt. At the end of December last year, Sibanye-Stillwater’s net debt was R23.7bn.

This followed the miner’s debt-fuelled acquisition, which saw it bag, among others, US miner Stillwater in 2016.

The spate of acquisitions, which have transformed the company from a gold producer to a diversified precious-metals miner, have put the spotlight on the company's debt. Among others, this has heightened concerns about Sibanye-Stillwater’s high balance sheet leverage.

Sibanye-Stillwater yesterday said the R6.5bn would reduce its current group leverage ratio to a level well below both the current debt covenant of 3.5 times net debt-to-company’s earnings before interest, taxes, depreciation, and amortisation and the future covenant of 2.5 times.

The streaming agreement was a long-term financing instrument, with no repayment of any of the advance amount under any circumstances and no minimum delivery obligations, at a cost that was lower than the company’s alternatives in international capital markets, Sibanye said.

“The streaming transaction is further delivery on our strategic commitments and validates the value we identified in the Stillwater assets. Importantly the transaction results in a significant reduction in group leverage, improving flexibility and reducing financing costs and risk.

"We are extremely pleased to have secured this competitively priced financing arrangement with a company of the quality of Wheaton International,” said Sibanye-Stillwater chief executive Neal Froneman.

In terms of the deal, Sibanye-Stillwater will get an equivalent of 100percent of gold production from the US platinum group metals (PGM) operations over the life of the US PGM operations. The agreement would optimise Sibanye-Stillwater’s capital structure by diversifying its sources of funding, “while immediately strengthening its balance sheet and reducing net leverage.”

It said the agreement had been structured at a cost which was competitive in relation to the company's current funding.

“The streaming agreement provides Sibanye-Stillwater with a long-term funding instrument that is linked to the operational performance of the US PGM operations and to the performance of the underlying commodities,” Sibanye said.

Sibanye shares on the JSE yesterday gained 2.17percent to close at R7.53 a share.