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Sibanye to buy highest-grade platinum deposit for $2.2bn

Dec 09 2016 11:21
Kevin Crowley

Johannesburg - Sibanye Gold [JSE:SGL] agreed to pay more than its market value for Stillwater Mining in a $2.2bn deal that would see the South African miner take charge of the world’s highest-grade deposit of platinum-group metals.

Sibanye will pay $18 a share in cash, a 20% premium to the Montana-based miner’s volume-weighted average closing share price over the past 20 days, the South Africa-based company said in a statement on Friday. The acquisition exceeds Sibanye’s market value of $1.9bn.

The producer will fund the purchase through $2.7bn in loans from Citigroup and HSBC and will pay back $500m of Stillwater’s convertible debt. The company will also raise at least $750m in a share sale.

Sibanye CEO Neal Froneman has sought to expand beyond the company’s base of aging South African gold mines and last year agreed to buy platinum assets from Anglo American Platinum [JSE:AMS] and Aquarius Platinum [JSE:AQP]. The Stillwater purchase is his biggest yet and first outside of South Africa. The Stillwater board has accepted the offer and recommends it to shareholders.

Stillwater’s two mines in Montana are the only platinum-group metals operations in the US and the biggest producer of these outside of South Africa and Russia. The mines will produce 535 000 to 545 000 ounces of platinum and palladium in 2016 at a cash cost of $430 to $455 an ounce. Platinum dropped 0.2% to $936.32 an ounce at 08:20.

“The transaction represents a unique opportunity for Sibanye to acquire high-quality, low-cost PGM assets which offer near-term organic growth,” Froneman said in the statement. The purchase will underpin the “strategy of paying sustainable, industry-leading dividends.”

Sibanye shares more than tripled in 2016 to a record-high R72.48 on August 5 , with Froneman saying earlier this year he would consider using the high stock price to make acquisitions. Since then, the stock has tumbled 61% to R28.35.

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