Sibanye slides 19% after raising R1.7bn in share placement
Boosted balance sheet will ensure the company can endure any exogenous socioeconomic challenges, says CEO Neal Froneman
Strike-battered Sibanye-Stillwater’s share price slumped as much as 18.8% on Wednesday, bigger than any daily fall on record, after it raised R1.7bn in a share placement on Tuesday that analysts said may indicate a further need to tap capital markets.
Sibanye raised the money, slightly less than expected, in an oversubscribed share placement in which it sold new equity at a discount to Tuesday’s closing price of about 9%.
Shareholders never like to be diluted through equity issues, especially at low equity price levels, said Hurbey Geldenhuys, head of research at Vunani Securities, adding that risks facing the company could lead to larger and cheaper rights offer later in 2019.
Sibanye is clearly worried about its ability to manage its debt obligations in the near term, but the amount raised will not move them significantly into the black, Geldenhuys said.
The miner had planned to raise R1.8bn in a share placement to position itself for platinum-sector wage talks and to restructure its gold mines. The placement, with existing and new institutional investors, represents 5% of its issued shares.
Sibanye’s share price closed 17.65% lower at R14.
Sibanye said it placed the shares at R15.50 a piece, a 2% discount to the 30-day, volume-weighted average price on Tuesday. Relative to Tuesday’s closing price of R17, the stock was issued at a discount of about 9%.
“While we remain confident that the current operating and economic conditions will support our deleveraging plans during the course of the year, the enhanced balance sheet flexibility provided by this transaction will ensure that the company is appropriately positioned and sufficiently robust to endure any exogenous socioeconomic challenges,” Sibanye CEO Neal Froneman said.
“It is pleasing to note the significant oversubscription of the transaction, which is testament to the strong market support for our company.”
The share placement possibly showed some “desperation” about the company’s balance sheet, said Nedbank mining analyst Leon Esterhuizen, and the discount the company was forced to take on the issue price suggested it was not an easy placement.
Risks facing the company include losses for its gold division, a possible strike in its platinum division, as well as the possibility of lower commodity prices, said Geldenhuys.
“If some, or all of these, come into play we may be up for a much larger rights offer. Shareholders may therefore opt to exit now and wait for the larger and cheaper rights offer,” he said.
SA’s largest gold producer had net debt of R21.3bn at the end of December 2018 and has extended the upper limits of its debt covenants to the end of 2019 to ensure they are in no danger of being breached because of the financial consequences of the ongoing gold strike.
Sibanye said on Tuesday that first-quarter gold output had fallen to 104,000oz, about a third of the 291,500oz it had produced in the first quarter of 2018, due to the wage strike called on November 21 by the Association of Mineworkers and Construction Union.