Sibanye’s Lonmin deal faces delay due to Amcu’s opposition
As the Sibanye gold strike goes on, Amcu's appeal against the Competition Tribunal's approval of the Lonmin takeover could further delay the deal
The final date for the conclusion of the Sibanye-Stillwater all-share takeover of Lonmin could be tested by union Amcu's late appeal against the Competition Tribunal's approval of the transaction.
Sibanye and Lonmin set the end of February as the date by which the deal — announced in December 2017 — would be concluded, securing a temporary waiver from Lonmin's lenders on the repayment of a $150m loan if certain covenants were breached.
While Lonmin has put a $200m funding structure in place to repay that debt, the stop date on the takeover deal remains end-February 2019, with an already delayed shareholder vote from both companies expected early in the new year.
Instead of having to repay the $150m on conclusion of the deal, Lonmin will have to repay between $60m and $80m on the new debt structure once the transaction is finalised, leaving the merged entity with a larger cash balance than under the old structure.
The Association of Mineworkers and Construction Union (Amcu), which not only fiercely opposes the transaction but is also involved in a protracted and violent strike at Sibanye's gold mines, has filed an appeal against the tribunal's highly conditional approval of the deal.
Amcu is concerned about the scale of job losses it feels will arise from the merged companies.
"Sibanye-Stillwater and Lonmin intend to request an urgent hearing date from the competition appeal court in relation to Amcu’s appeal," both companies have said.
The lateness of the appeal means the matter is unlikely to be heard before the end of 2018, and only in January, the month in which both companies intend to conduct their shareholder votes.
The shareholder vote was pushed into 2019 from late in 2018 after a delay in the tribunal's hearing of the transaction.
Lonmin's board has remained steadfast in its endorsement of the deal, with senior executives pointing out it simply does not have the financial resources to sustainably run the business, especially if there are any adverse movements in metal prices. Prices for platinum, which makes up the bulk of production, remain moribund.
When the transaction was unveiled by Sibanye and Lonmin in 2017, the world's third-largest platinum miner's CEO, Ben Magara, said the company would cut up to 12,600 jobs as it stopped old and high-cost shafts — something it would do regardless of the takeover.
The tribunal imposed a moratorium on any job cuts in the merged entity, which would be one of the world's leading sources of platinum group metals, with Sibanye owning mines, concentrators, smelters and refineries in SA, Zimbabwe and the US
Gold strike continues unabated
The approval from the tribunal on November 21 coincided with the wage strike Amcu called at Sibanye's gold mines, which are the largest single source of South African gold.
The strike could not have come at a worse time for Sibanye, having had a dismal first half of 2018 with 21 miners killed at its gold mines, which are now unprofitable and a source of concern for investors.
Sibanye has said three employees have been killed in violence related to the strike that shows not signs of coming to an end.
The most recent development has been Sibanye's urgent application to the Labour Court to declare the Amcu strike unprotected and to interdict it, forcing Amcu's members to return to work.
Sibanye's argument is that the other three unions, which signed the three-year wage deal earlier in 2018, had gained a 51% majority representation of the gold workforce since the start of the strike, from 48% at the time they agreed to the wage offer in November.
Amcu said it did not believe the change in union membership numbers that Sibanye had audited by an outside company.
“We cannot accept the numbers submitted in this court because the management failed to consult with Amcu when they were auditing the memberships of the unions. Sibanye Stillwater recruited their own auditing firm and did not give Amcu the opportunity of presenting their own membership numbers,” the union said.
Sibanye said the wage deal would now be extended to Amcu members, which went on strike demanding a R1,000 per month increase compared to the R700 a month settlement for the first two years and R825 a month increase in the third year.
Sibanye has not given any indication yet of what the effect has been on production at its gold mines or the financial consequences, but it is expected to do so before the end of 2018.
"We have tried to mitigate the impact of the strike by producing where we have the best attendance," said Sibanye spokesperson James Wellsted, pointing out there was "little production happening at Driefontein, which is an Amcu stronghold".
The Kloof mine, which is dominated by the National Union of Mineworkers, Amcu's rival, has been in production, as has Beatrix, the scene of some of the worst violence and intimidation.
"We have also tried to manage costs by focusing production on specific areas and then not ventilating and refrigerating other areas where possible," Wellsted said.