Sibanye-Stillwater plays down AGM bond jeopardy

SIBANYE-Stillwater’s annual general meeting on May 28 carries more than the usual jeopardy following the company’s surprise $500m convertible loan launched last year. If shareholders vote against the normally standard resolution permitting the issue of shares, Sibanye-Stillwater will have no option but to settle the bond in cash.

Right now, with net debt last stated at R12bn and commodity prices cratering, the company would find it difficult to do so. Based on analysts’ questions at the group’s annual results presentation on March 5, there’s a view that management should solve its own liquidity problems rather than having shareholders pay for it with equity.

One repeated question was whether Sibanye-Stillwater planned a rights issue. “This perception is completely wrong,” replied CEO Neal Froneman. Asked if he feared a negative shareholder backlash at the AGM, Froneman said he would prefer to settle the bond in cash anyway.

He also pointed to a recent improvement in the share, up 18% since the year end results presentation. Though still short of the bond’s conversion price of R24.31 to R25.24 a share, assuming a 30% to 35% premium to the share’s November 21 close, Froneman said the recent share price performance shows confidence is slowly recovering.

In the meantime, Sibanye-Stillwater is assessing how it can destress the balance sheet. The best solution would be for a resounding improvement in PGM prices. In the absence of that — which analysts consider unlikely this year — the company will be pushed to sell assets.

Sibanye-Stillwater plans to invite bids for its extensive uranium resources. It also hopes to sign a prepayment or streaming deal on gold metal byproducts from PGMs. These are worth an estimated $500m at the current gold price over the life of Sibanye-Stillwater’s PGM mines.

Unfortunately, a second wave of restructuring is also under way. Sibanye-Stillwater is reviewing up to 4,000 jobs at its head office and its older gold shafts (though the number of jobs lost will be much lower). Froneman acknowledged that these are testing times:

“The challenge is to keep our own team focused. Sometimes there is a bit of panic among shareholders and even staff. But we’ve been here before. It’s just business cycles.”