Sibanye shares drop 17.65% in spite of raising R1.7bn on JSE
The share price closed at R14.
Sibanye-Stillwater announced on Tuesday evening that it would place more than 108 million new ordinary shares on offer to bolster its balance sheet.
The placement, which was offered to existing and new institutional investors, was at a price of R15.50 a share, a discount of 2 percent to the average price over the past 30 days on a volume-weighted average basis and lower than Tuesday's closing price of R17 a share.
In a statement yesterday, Sibanye-Stillwater chief executive Neal Froneman said the share sale proceeds also helped to create a buffer before wage talks at its South African platinum operations, as the group expected a tough negotiations season.
He said the over-subscription of the transaction attested to the strong market support for the company.
“While we remain confident that the current operating and economic conditions will support our deleveraging plans during the course of the year, the enhanced balance sheet flexibility provided by this transaction will ensure that the company is appropriately positioned and sufficiently robust to endure any exogenous socio-economic challenges,” Froneman said of the offering.
Anchor Capital investment analyst Seleho Tsatsi said the onslaught on the Sibanye-Stillwater share price probably took its cue from the group’s production update, which indicated it was at 36 percent capacity of the normal run-rate for gold production.
The group said yesterday that its first-quarter gold production was hurt by the ongoing Association of Mineworkers and Construction Union (Amcu) strike, and it expected to produce 90 percent of what was planned under strike conditions, and 36 percent of production levels relative to the year-ago quarter.
Unit operating and all-in sustaining costs would be hurt by the reduced production levels, the company said.
“As long as there is a strike on, they will be burning cash at their gold production. The PGM (platinum group metals) basket has also not helped matters,” Tsatsi said.
The company has also been under pressure to cut borrowings since its more than R30 billion acquisition of US palladium miner Stillwater Mining. While Sibanye is benefiting from higher palladium, rhodium and platinum prices, the South African strike and other operational issues at its gold operations have hit earnings and delayed efforts to reduce debt.
Analysts warned that Sibanye-Stillwater was worried about its ability to manage its debt obligations in the near term, but the amount raised would not move the company significantly into the black, and that further risks could lead to larger and cheaper rights offerings later in the year.