S&P Global Ratings assigned Sibanye Gold a preliminary B+ credit rating for its pending $1bn bond issue and gave it a positive outlook as it advances its strategy to become a major global platinum group metals (PGM) producer.
Sibanye is wrapping up the financing of a $2.65bn bridging loan to pay $2.2bn cash for Stillwater Mining, a US-based palladium and platinum miner, and adding output to its large platinum production base in SA, leapfrogging it into third place as a leading PGM producer.
“The affirmative credit ratings endorse Sibanye’s maturing business model and the value that is being created by our recent acquisitions,” said Sibanye CEO Neal Froneman.
Sibanye is funding the bridging loan through the issue of the bond, which should be finalised before the end of June, a $1bn rights issue, with the balance of the loan financed before the end of 2017 through a streaming deal on platinum production from Stillwater, a convertible bond, rights issue or debt.
Stillwater will issue the bond and Sibanye will guarantee it.
“Refinancing the Stillwater acquisition bridge facility is a key focus area of ours and hence these ratings are a positive step forward in establishing an appropriate long-term capital structure for Sibanye,” Froneman said.
Sibanye has mandated Citi, HSBC and Barclays as global co-ordinators and bookrunners, as well as Credit Suisse and Standard Bank as bookrunners of the $1bn bond.
S&P said the B+ rating was preliminary and could be changed or withdrawn.
“Final ratings will depend on successful rights issue and our receipt and satisfactory review of final documentation of the bond issue. Accordingly, the preliminary ratings should not be construed as evidence of final ratings,” the agency said. “The positive outlook reflects our forecast that, having completed the Stillwater acquisition, Sibanye will generate positive discretionary cash flow that should enable the company to gradually reduce leverage under our current base-case assumptions and in line with its stated financial policy,” S&P said.
“This is based on our assumption that the company will successfully cut costs in its recently acquired South African platinum group metals assets,” S&P said.
Froneman has said since February that Sibanye could cut 200,000oz-300,000oz of platinum production from its Rustenburg suite of shafts that it bought from Anglo American Platinum if it could not mine them profitably.
He has given the shafts under review until the end of 2017 to improve performance.
“The business risk-profile assessment of Sibanye reflects a company with an ambitious growth strategy. Its portfolio of assets is spread across the cost curve, with high exposure to labour-intensive South African mining operations, some of which are high cost and in need of restructuring,” S&P said.
“However, Sibanye’s management team has a good track record of cost reduction and reserve extension of its South African gold assets,” it said.