How Sibanye-Stillwater aims to cut costs and raise cash
After losing R16bn of its market capitalisation so far in 2018 in a precipitous fall of its shares, Sibanye-Stillwater has outlined plans to generate cash and cut costs.
The company wants to generate up to $500m and cut R1bn from costs in SA where its gold mines have a poor safety performance in May.
In the same update, Sibanye confirmed its belief in the success of its nearly R5bn all-share acquisition of platinum miner Lonmin, reiterating the cost and operational benefits of combining the world’s third-largest platinum miner’s assets with its own mines and plants near Rustenburg.
Sibanye’s board was acutely aware of the "accelerated" drop in its already reduced share price and it was tackling the concerns behind the 47% fall in its stock in the year to date, giving it a capitalisation of R18bn.
This made it the worst performer of the JSE’s major gold and platinum producers.
Investors are worried about the ability of Sibanye to service its debt without resorting to a rights issue.
Only Lonmin has matched the fall, giving up 47% too.
Sibanye’s net debt of R23bn, surpassing the value attributed by the market to the company, was incurred during 2017 when it raised $2.2bn for the cash purchase of US firm Stillwater Mining, a palladium and platinum miner based in Montana.
Investors are worried about the ability of Sibanye to service its debt without resorting to a rights issue given the volatility of the rand when it comes to selling South African gold and platinum group metals (PGMs).
Sibanye made it clear on Thursday a rights issue was not an option. "The group has no intention to issue equity in order to reduce debt. Even under significantly more challenging circumstances, this remains an unlikely scenario," it said.
Instead, it was considering options of raising up to $500m from a streaming transaction. These deals involve a company selling the future production of one or more metals from one of its mines in exchange for an upfront cash payment.
Sibanye could possibly agree to a streaming deal on the platinum coming from its Stillwater assets, where the metal is regarded as a byproduct to its palladium production.
The second option would be releasing up to $100m from its PGM recycling business at Stillwater through a financing deal. Sibanye said a final decision regarding these financial options "will be announced shortly".
Sibanye has already refinanced a $350m revolving credit facility by putting in place a $600m facility due in 2021, with the option of expanding it by $150m more. It has begun implementing plans to cut costs by R1bn.
It did not entail cutting jobs, said spokesman James Wellsted, adding that trimming costs in procurement, power savings, winter electricity tariffs and water management would contribute to the savings.