LONDON (Alliance News) - Platinum group metals producer Sibanye-Stillwater Ltd on Thursday said its takeover of Lonmin PLC is progressing as planned, as it aimed to reassure investors in light of a recent share price fall.
Sibanye, also known as Sibanye Gold, said it has noted "with concern" the significant drop in its share price, which has accelerated in recent weeks. Management believes this uncertainty is "unwarranted", and primarily driven around concern around high balance sheet leverage, recent safety incidents and the viability of its Lonmin deal.
Shares in Sibanye are down 47% in the year-to-date.
Sibanye highlighted that its net debt to adjusted earnings before interest, tax, depreciation and amortisation ratio as at the end of its first quarter stood at 2.4 times, which was 8% lower than at the end of 2017, and also below prevailing covenant levels of 3.5 times.
The company said it is committed to ensuring a safe working environment, adding that the "recent spate" of serious safety incidents since February this year have been of "significant concern" to the board.
Sibanye said it convened a safety summit last week which it said was well-attended by material stakeholders, representation unions and the Department of Mineral Resources. A follow-up workshop has been scheduled in three weeks time, the group said.
Operationally, Sibanye said South African and US PGM projects continue to deliver consistent results, maintaining their "solid" first quarter performance.
South African gold operations have, however, experienced safety related stoppages which have hit production. The Masakhane mine in early May saw a seismic event, which resulted in a temporary suspension of production at Kloof and Drifontein as rescue efforts were underway.
Seven employees at the mine died as a result of being trapped underground at Masakhane following the seismic event.
The hit to production from this incident was approximately 5,240 ounces, or 0.4% of guided group gold production for 2018. Operations at Masakhane remain suspended.
Turning to Lonmin, Sibanye said the deal is progressing according to plan, adding that Lonmin's first half results were "largely" in line with Sibanye's expectations.
Sibanye said it still believes in the rationale behind the offer, as it will acquire a fully integrated PGM company, and the all-share deal will ensure the transaction does not add to group debt or leverage.
Under the deal, Lonmin shareholders will receive 0.967 of a new Sibanye share for every Lonmin share. Following completion, Lonmin shareholders will hold 11.3% of the enlarged group, and Sibanye shareholders 88.7%.
"We remain excited about the opportunity to close this transaction, which is compelling from a strategic and a value perspective," said Sibanye.
Shares in Sibanye were up 1.8% at ZAR8.04 on Thursday, while Lonmin was up 2.7% in London at 44.50 pence, and up 2.8% in Johannesburg at ZAR7.39.
