Market seems to really fancy this Sibanye-Lonmin deal
Share prices of both companies rocket on Monday
As the date for the Competition Tribunal two-day hearing into the Sibanye-Stillwater all-share takeover of world-number three platinum miner Lonmin approaches both shares have rocketed higher.
Buoyed by an improved bullion price, Sibanye has moved well off its lowest point this year of R7.08 and is closing in on the highest level of R16. By the close on Monday the share had gained 13.5% to touch R12.51.
Taking the cue from Sibanye, Lonmin shares increased by 9.3% to R11.20, bringing it closer to its year high of R15.01.
The two-day tribunal hearing will start with the foundation of a recommendation from the Competition Commission that the takeover of Lonmin’s mines, concentrators and refineries proceed in a highly conditional transaction.
Sibanye has the chance to argue against some of the conditions, but they are hardly deal breakers. In the light of the high unemployment rate, it is sensible for the company with gold and platinum mines in SA to reduce the social impact that could stem from the deal.
Lonmin has already embarked on a process to cut 12,600 jobs over three years, shutting old, unprofitable shafts.
The commission estimated that up to 3,000 more jobs could be lost at the mines and processing plants and wanted three short-term mining projects implemented to reduce this number. It also wanted Sibanye to continue Lonmin’s procurement deals with communities and press on with the platinum miner’s social and labour plans.
The success of this deal is critical to ensure the long-term survival of Lonmin’s assets in a low price environment, with the company facing a $150m loan repayment if the deal doesn’t go ahead, leaving it scant cash for operational uses. Sibanye is fully aware of this and it is unlikely to push too hard against conditions.