The political environment in South Africa has recently undergone substantial change. While structural changes are yet to be seen, general sentiment around the country’s prospects for economic stability and growth is more positive.
According to Sibanye-Stillwater, this has notably reflected in the strength of the local currency, which has appreciated by 6% against the dollar in 2018 to date and, remarkably, by 18% since the beginning of 2017.
The miner noted, the dollar denominated precious metal prices have increased, and while the rand will continue to impact on industry margins, overall spot prices are generally higher than at the same time in 2017.
While the political and regulatory outlook appears more positive, and suggests upside for the beleaguered mining industry, the company said they would continue to adopt a cautious and measured approach.
“Sibanye-Stillwater has undergone significant change and done so under challenging circumstances at what we believe to have been a low point in the precious metals commodity price cycle. Recent strength in precious metal prices, supported by improving market fundamentals, underpins our view. We are convinced that Sibanye-Stillwater offers fundamental value and is strategically positioned to benefit from any upside in precious metal prices,” said Neal Froneman, CEO, Sibanye-Stillwater.
On 14 December 2017, an all-share offer to acquire 100% of Lonmin was announced. The transaction, if successful, will complete the fourth step in Sibanye-Stillwater’s PGM strategy, giving access to a world class processing business, enabling it to become a fully integrated PGM producer in South Africa, with long-term growth potential through Lonmin’s advanced projects. This logical transaction will enable the realisation of significant synergies, which will bring greater stability to both the Lonmin and Sibanye-Stillwater’s SA PGM operations.
In addition to the PGM transactions during the year, the proposed transfer of certain gold surface assets on the West Rand for a 38% shareholding in DRDGOLD Limited (DRDGOLD) and an option to acquire a majority stake, was announced on 22 November 2017. Again, this logical transaction will deliver immediate value from the West Rand Tailings Retreatment Project (WRTRP) while also providing future optionality without the need to incur significant capital investment.
Sibanye-Stillwater maintains its prudent approach to capital management, with balance sheet deleveraging and preservation of long term financial flexibility remaining key priorities. Net-debt (excluding the Burnstone Debt and including the US$450 million convertible derivative instrument) at 31 December 2017 was R23,176 million (US$1,875 million). There was a 7% reduction in net debt to adjusted EBITDA to 2.6x, compared with 2.7x at 30 June 2017. The Group also has sufficient liquidity with committed unutilised debt facilities of R3,653 million (US$296 million) at 31 December 2017.
In order to maintain adequate liquidity, the refinancing and upsizing of the US$350 million Revolving Credit Facility (RCF), maturing on 23 August 2018, has been launched. A term sheet has been executed with the two Bank coordinators who have each received credit approval for a US$100 million participation. We anticipate closing of the syndication during March 2018. The terms and conditions largely mirror the current US dollar RCF which is US$92 million drawn as at 31 December 2017. This will increase our available facilities by about US$250 million.
Capitalisation issue to shareholders
Consistent with the previous financial period, the Board has resolved to issue 4 capitalisation shares per 100 held, to shareholders, maintaining Sibanye-Stillwater’s commitment to deliver industry leading returns to shareholders.