Sibanye $1bn rights issue could see firm go backwards – Viljoen

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THE jury was out on Sibanye Gold’s $1bn rights issue the proceeds of which will be used to fund its $2.2bn takeover of US-based platinum and palladium miner, Stillwater Mining.

That was the view of Piet Viljoen, chairman of asset management company, RE:CM, who said that using shares to finance significant acquisitions often “went backwards”.

“We think issuing equity to fund transactions is a very expensive form of acquisition currency,” he said. “They grow by issuing shares, but things can go backwards.

“I prefer to say let’s give them the benefit of the doubt. We need to see whether in time this one will be different, but I’m not sure. I’m undecided,” he said. RE:CM was a shareholder in Sibanye Gold.

Sibanye has embarked on a roadshow for a $1bn bond which it will use to partly repay a $2.65bn bridging finance raised to finance the Stillwater deal which recently won shareholder support at Sibanye and Stillwater.

S&P Global Ratings recently assigned a preliminary B+ credit rating for the bond issue and gave it a positive outlook in terms of its strategy to become a global precious metals company.

The reception among analysts, however, is that Sibanye has paid a full price for Stillwater whilst shares in the company were down 35% after the rights issue were announced.

Analysts said the rights issue – priced at R11.28 per share – represented a 60% discount to Sibanye’s close on May 18 of some R28.48/share. The counter-argument from Sibanye is that in exercising the rights shareholders retain their exposure to the company.

3 COMMENTS

  1. The other side of the coin is that over the next three years business in South Africa might become extinct. 2019 is the next election and between the ANC, SACP, Cosatu alliance or non-alliance South Africa will be hit with strikes and political unrest that Stillwater might be the saviour of this company. We all know what politicians are prepared to do to keep their seats on the gravy train.

  2. Viljoen knows nothing about mining and is probably a safer bet to do the opposite to him to make money. If I were to choose between RECM or SGL it’s not even a choice! My money is on Froneman and that he’s done his sums and will surprise to the upside later this year!

  3. In 5 years there will not be a mining industry left in South Africa. I am investing in Neal because he will be taking the cash flows from the death throes of the SA Industry and set the company up where we can make money. We do not need SA to make money, but they DO need us… Unfortunately, I think it is already too late to save them. I feel sorry for the future generations of South Africans who have lost the bright future they would have had were it not for Zupta…

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