Picture: ISTOCK
Picture: ISTOCK

Sibanye Gold unveiled the terms of its underwritten rights offer towards funding the $2.2bn cash purchase of US-based Stillwater Mining, a palladium and platinum miner, showing a sizeable 60% discount to Wednesday’s share price close.

It is offering 1,195,787,294 shares to its shareholders for R11.28 each, or $0.86, allowing them to buy nine shares for every seven shares they own in a process that starts on the morning of May 29 and closes at midday on June 9.

The share price fell more than 6% in intraday trade on Thursday to R26.75.

The rights offer will raise R13.49bn, or $1.026bn using Sibanye’s exchange rate of R13.15 to the dollar.

The offer represents a 60% discount to Sibanye’s closing price on Wednesday and a 62% discount to the 30-day volume weighted average price up to the end of Wednesday.

The rights issue is fully underwritten by Citigroup Global Markets, HSBC Bank, JP Morgan Securities, Morgan Stanley and Rand Merchant Bank.

Asked whether Sibanye considered the discount to be substantial, spokesman James Wellsted referred to the theoretical price of the shares after the rights issue and that the offer represented a 40% discount, which was in line with other mining companies’ rights issues over the past decade, which, on a similar metric, were discounted between 35% and 40%.

Sibanye secured  a $2.65bn bridging loan to buy Stillwater and settle bonds in  the company

The discount was agreed between the underwriting banks, which wanted a big discount to ensure the shares were all bought by shareholders, and Sibanye, which wanted as small a discount as possible, since investors would have to pay more than half of Sibanye’s R24.9bn market cap to retain their percentage investment.

Gold One, a Chinese-owned company that owns 19.9% of Sibanye, has said it would follow its rights.

Sibanye secured a $2.65bn bridging loan to buy Stillwater and settle bonds in the company. Sibanye has said it would repay the loan via the $1bn rights offer and $1bn in debt, most likely through a normal corporate bond in coming weeks.

Sibanye has started talks with ratings agencies about a rating for a $1bn corporate bond the company will issue before the end of June. It wants the rights offer concluded so that its total debt is smaller by $1bn.

The downgrade of SA’s sovereign credit rating by Fitch and S&P Global Ratings to sub-investment grade would probably make the bond a little more expensive than would otherwise have been the case but talks with the ratings agencies had yet to be concluded, Wellsted said.

Sibanye is considering a number of options to raise the balance, including a streaming deal, which entails selling forward its platinum production from Stillwater for a large upfront payment and then regular discounted payments from a streaming company for agreed metal deliveries over the life of mine. Or Sibanye could look at a convertible bond, a rights issue or bank debt to fund the balance. A decision was due on the option in the third quarter of 2017, Wellsted said.

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