SIBANYE-Stillwater wasted little time putting the $500m received in July from its streaming deal to good use with the company today announcing it would retire $400m of its higher interest, medium and long term debt.
This is equal to about 31% of the $1.5bn raised to part finance the $2.2bn purchase of Stillwater Mining during 2017. The debt will be repurchased and retired through a tender offer – a development that reduces annual interest on the debt by $26m.
Up to $350m, including accrued interest, will be applied to the repurchase of Stillwater Mining’s 6.125% bond Notes which fall due on 27 June 2022, and 7.125% bond Notes due 27 June 2025. A further $50m will be applied to the repurchase of Sibanye Stillwater’s 1.875% Guaranteed Unsecured Convertible Bonds which fall due on 26 September 2023.
“We are pleased to launch the tender process to repurchase our medium term corporate and convertible bonds, utilising the proceeds of the competitively priced stream financing we recently concluded,” said Neal Froneman, CEO of Stillwater Mining.
“The repurchase of these instruments creates immediate value and will meaningfully reduce annual finance expenses and repayment obligations associated with our debt, consistent with delivery against our strategic goals,” he said in a company statement.
Barclays Capital and Absa Bank Limited will act as dealers for the tender on both the note offers and the convertible bond offer. Further announcements will be issued upon the closure of the tender processes of the bond notes and convertible bonds, the company said.
Debt reduction is a principal aim of Sibanye-Stillwater which saw its share price punished earlier this year on investor fears it may have to issue shares to ease pressure on the balance sheet. Whilst Sibanye-Stillwater long-flagged the possibility of selling gold forward in a royalty streaming arrangement, doubt still existed.
Then on July 16, the company announced it would sell all the gold from the US platinum group metal operations, which is mined as a by-product, and an initial 4.5% of palladium, dropping to 2.2% and then 1%, as various milestones are reached to Wheaton International. In addition to the upfront cash, Wheaton International is to pay Sibanye-Stillwater 18% of the spot price of gold and palladium for every ounce delivered until the $500m is fully offset. Then Sibanye will receive 22% of spot gold and palladium prices.
Speaking to Miningmx in June about the firm’s medium-term prospects, Froneman said: “Twelve months from now, we are significantly deleveraged. A picture I can envisage is something like our net debt to EBITDA sitting at 1.5x.
“The cash flow from our operations are solid enough to reintroduce the dividend and we are then embarking upon the next part of our strategy while we are integrating Lonmin and realising the benefits from that. Next part of the strategy?“I do think we need to grow our gold business, and that will be the primary focus.”
