JOHANNESBURG - Precious metals miner Sibanye-Stillwater has announced that it was taking steps to reduce its debt as concerns over its share price mounted following a recent spree of debt-funded acquisitions.
Sibanye-Stillwater, however, ruled out issuing equity in order to ease the debt burden. “Even under significantly more challenging circumstances, this remains an unlikely scenario,” Sibanye-Stillwater said in an update.
The company’s net debt was R23 billion at the end of last year, as it transformed itself from a gold miner with mature operations to a global, precious metals company, especially following last year’s acquisition of Stillwater.
Sibanye said it remained concerned about the recent drop in the company’s share price and market value. Yesterday, the Sibanye-Stillwater stock declined 0.13percent on the JSE to close at R7.89. A year ago, it was trading at R15.82 a share.
The group admitted that there were concerns about its debt, recent safety incidents “and associated operational disruptions and concerns regarding the viability of the Lonmin transaction”.
It said that prior to the acquisition of Stillwater last year, its debt was negligible and lower than that of its global mining peers.
The company also moved to allay concerns about its debt maturity profile, which it said had been carefully structured.
Sibanye-Stillwater recently refinanced the $350million (R4.4billion) revolving credit facility which was due to mature in August this year.
It said it was considering non-debt options to reduce debt, but would announce a final decision on the financial options shortly.
Momentum SP Reid Securities equity research analyst, Sibonginkosi Nyanga, said that the pile of debt was well-known.
Nyanga said it was inevitable to question the ability of the company’s operations to support the debt. “For instance, there are issues with gold assets, given the current South African rand/US dollar exchange rate and the gold price,” he said.
Sibanye-Stillwater said it was also concerned about the recent spate of safety incidents since February.
The company has attributed the high number of fatalities to non-compliance to procedures and standards “for which employees are trained”.
It said the tragic seismic accident at Masakhane mine in Driefontein near Carletonville on the West Rand resulted in the temporary suspension of production at the Kloof and Driefontein operations.
“The direct impact on production from the tragic seismic incident was approximately 160kg as at May 5, 2018, which is approximately 0.4percent of total guided group gold production of between 38500kg and 40000kg for the year ending December 31, 2018,” the company said.
Sibanye-Stillwater said operations at Masakhane, which produces about 11kg of gold a day, remained suspended, pending an assessment of the seismic damage caused to the mine.
It said the proposed acquisition of Lonmin, however, was proceeding according to plan, adding that it made submissions to the South African and UK competition authorities in March and April, respectively.
“We remain excited about the opportunity to close this transaction, which is compelling from a strategic and a value perspective,” Sibanye-Stillwater said.