Sibanye-Stillwater eyes international prospects, new listings

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Cape Town – Sibanye-Stillwater [JSE: SGL] which last year announced its plans to acquire Lonmin [JSE: LON] has bigger plans to compete internationally, and is considering listing on other stock exchanges in future, according to CEO Neal Froneman.

He was speaking at a corporate briefing on the company at the 2018 African Mining Indaba on Tuesday.

Froneman unpacked the changing structure of Sibanye-Stillwater, previously known for being a player in the gold mining industry as Sibanye-Gold.

Sibanye first entered into the platinum group metals (PGM) industry in April 2016, when it acquired Aquarius Platinum, and then in November 2016 Rustenburg Platinum Mines (RPM).

Froneman explained that the “gold bull” was looking to keep its competitive edge by considering other commodities. “The PGM sector in South Africa was an area that could do with consolidation,” he said. 

In May 2017 it took on US-based palladium mine Stillwater and subsequently changed its name to Sibanye-Stillwater in August 2017. He called this a “well-timed” acquisition of a well-run company.

Froneman said that there were criticisms that Sibanye paid too much for Stillwater and that the premium was too high. “Personally, I do not think a premium of 22% to take control of a company is excessive,” he said. Since the acquisition the price of palladium has gone up 60%, and margins had similarly also increased, Froneman noted. The US acquisition had also helped the company diversify its risk, geographically, he explained.

Froneman said that even though the company has diversified its offering, it is still willing to do more in the gold sector. But only sticking to gold would have resulted in a significant “margin squeeze”, given pressures of inflation and the price of the commodity which was moving mostly sideways.

“Diversification has been beneficial to us and part of the reason to move into the PGM sector,” he said. 

Lonmin acquisition

The Lonmin transaction will possibly take nine months to wrap up, it is subject to shareholder approval. Lonmin was the first company Sibanye approached among the platinum producers, but they were not well-received at first, Froneman admitted.

The acquisition will see Sibanye-Stillwater acquire 100% of Lonmin. He said that the price Sibanye-Stillwater paid for Lonmin (R5bn) may have been low but it was fair for Lonmin which had been facing financial issues.

He explained Lonmin is to be acquired from a neutral debt position. Stillwater was acquired with cash and the company incurred debt, but this is not the case with Lonmin, which is to be acquired with shares.

Sibanye-Stillwater also issued a strategy for Lonmin, indicating how it will keep the platinum miner as a cash neutral producer, given the current commodity PGM prices.

“Should our shareholders not approve the deal, we have the right to engage with Lonmin to buy selected assets.

“Both from a Lonmin perspective and a Sibanye-Stillwater perspective, we have retained significant optionality to address their problems and to make a good commercial decision should shareholders not approve. There’s no reason they won’t,” he said.

During an interview earlier on Tuesday, Lonmin CEO Ben Magara spoke on the importance of the Sibanye-Stillwater deal which ensured the long-term sustainability of the mine, which had been hamstrung by its capital structure and by the lack of liquidity. Magara said the acquisition was in the best interests of its shareholders and the majority of its employees.

Senior league

While concluding his address, Froneman said that Sibanye-Stillwater  has moved into the “senior league of precious metals producers”.

Going forward Froneman said the company will focus on completing the Lonmin transaction and its integration. The second priority is to deleverage the company, which has entered into huge amounts of debt. “We will not use precious cash to buy other assets at this stage,” he said.

“We will maintain focus on operational excellence, that is where cash comes from.”

When it comes to growing further, Sibanye-Stillwater is considering listing on other stock exchanges. The primary listing is on the JSE, with the majority of exposure to South Africa. But the company is considering listing where it will get the most traction and the most premium on its share price. However, Froneman said this is a secondary step and the company will initially focus on its delivery in order to grow. 

He also added that the company intends to compete on the international stage. “We can’t only win rugby in South Africa. We need to beat the All Blacks in New Zealand. We need to beat the Australians in Australia and the Brits in Britain.”

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