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Sibanye Gold Buys Stillwater Mining for $2.2 Billion

- By Alberto Abaterusso

Sibanye Gold Ltd. (SBGL), a South African gold mining company with gold and platinum mining operations in South Africa and Zimbabwe, will purchase US Stillwater Mining Company (SWC), a palladium and platinum producing company with operations based in Montana and headquartered in Littleton, Colorado, for a total of $2.2 billion.


Sibanye Gold says that the total consideration represents "a 23% premium on the price of the U.S. palladium and platinum producer according to the close price on the New York Stock Exchange on Thursday, Dec. 8, 2016."

The agreement was announced by Sibanye Gold on Dec. 9, confirming its interest to extend its portfolio of operations by including also the platinum mines of the U.S. group, thus becoming a worldwide precious metal producer and a remarkable potential growth company for its stakeholders.

"The Transaction is consistent with Sibanye's strategy of creating superior value for all of our stakeholders, by enhancing the cash flow generation and growth profile of its portfolio, underpinning its strategy of paying sustainable, industry leading dividends," Neal Froneman, Sibanye's CEO, said.

Concerning Stillwater Mining, the negotiation will undergo the voting procedure in the shareholder's meeting. The management of Stillwater seeks for a favourable outcome which will mean that the U.S. palladium and platinum producer will become part of one of the most important mining companies that operates globally.

"Sibanye has complementary values to Stillwater, and we are confident that Sibanye will continue to be a world-class steward of our operations and partner to our local communities in Montana," Mick McMullen, Stillwater's CEO, said.

More details about the agreement can be found on the website of Sibanye Gold under the title "Proposed Acquisition of Stillwater Mining Company: A Premier, Global Precious Metals Miner."

On Dec. 9, Sibanye Gold closed at $7.10, or down $1.26 from the previous trading day with a volume of 5,156,194 shares traded on the New York Stock Exchange, versus an average volume of 2.37 million shares traded over the last 10 trading days and an average volume of 1.54 million shares traded over the last three months.

The company has a market capitalization of $1.54 billion and 923.9 million shares outstanding of which 227.4 million can be traded on the stock market.

Sibanye Gold Limited has approximately $61.39 million in cash on hand and total debt of $495.61 million in the most recent quarter.

The PB ratio is 1.60 and the Enterprise Value/EBITDA is 3.24.

During the third quarter of 2016, Mario Gabelli (Trades, Portfolio) sold out his position in Sibanye Gold Limited.

On Dec. 9, Stillwater Mining Company (SWC) closed at $17.32, or up $2.64 from the previous trading day with a volume of 37,738,850 shares traded on the New York Stock Exchange, versus an average volume of 6.99 million shares traded over the last 10 trading days and an average volume of 2.31 million shares traded over the last three months.

The company has a market capitalization of $2.1 billion and 121.08 million shares outstanding, of which 107.33 million can be traded on the stock market.

The company has approximately $439.41 million in cash on hand and total debt of $29.38 million in the most recent quarter.

The PB ratio is 2.29 and the Enterprise Value/EBITDA is 22.67.

During the third quarter of 2016, Barrow, Hanley, Mewhinney & Strauss reduced their position in Stillwater Mining by 1.73%.

Disclosure: I have no positions in any stock mentioned in this article.

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This article first appeared on GuruFocus.