One of South Africa's leading precious metal miners, Sibanye Gold (SBGL), is setting its sights on the U.S. with its latest corporate acquisition.
The metals mining sector has suffered in South Africa during 2016 due to a number of factors. Workers' strikes and illegal mining have cut into profits; political unrest and multiple scandals surrounding the country's president, Jacob Zuma, have deterred foreign investment and even put South Africa's credit rating at risk. An outright collapse of the country's mining industry is not far-fetched, though such a development would have enormous repercussions.
This is why Sibanye is diversifying its operations by buying out the Montana-based platinum miner, Stillwater Mining (SWC).
Stillwater is the one and only primary platinum and palladium producer located in the United States. Sibanye has emphasized that it needs to spread its assets and operations geographically in order to compete with its largest peers. Also, making a greater play in the platinum market will also help diversify Sibanye's business away from the turmoil in the firm's homeland.
The acquisition is reportedly worth $2.2 billion. Stillwater is the world's biggest platinum miner outside of South Africa or Russia. The buyout will make Sibanye the third-largest platinum producer in the world. This also ranks as the second-largest M&A move involving a South African company this year.
More to Come
Undoubtedly, South Africa will absolutely need its gold mining industry to get back on course if its beleaguered economy is going to bounce back. This may only be the first move in a string of acquisitions that Sibanye will ultimately pursue, according to the company's chief executive, Neal Froneman.
“There must be more expansion. You can never get complacent and sit on your hands,” said Froneman in a recent interview.
Sibanye was originally spun off from the mining firm Gold Fields (GFI) and became its own entity in 2013. By expanding its holdings outside of South Africa, Sibanye is embarking on a brave new era in its corporate history. This isn't the first foray that the company has made into platinum mining, either: last year, Sibanye acquired Aquarius Platinum and also bought the Rustenburg mine from Anglo American Platinum (AMS), a fellow South African miner.
Moreover, the post-election slide in platinum prices may have enticed Sibanye on one end and squeezed Stillwater's profit margins on the other end. CEO Froneman was publicly bullish on platinum earlier this year.
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