Aquarius Platinum rescued by Sibanye Gold for R4-bn in cash

Sibanye Gold said on Tuesday it would acquire Aquarius Platinum in a $294-million (R4billion) deal to bolster its platinum portfolio.

The transaction sent the long underperforming Aquarius stock up as much as 46% to R2.48 a share on the JSE, and marked a continuation of a shake-up within the struggling platinum industry. Sibanye surged nearly 14% to R20.41.

Last month, Sibanye agreed to buy Anglo American Platinum‘s Rustenburg mining and concentrator operations for R4.5-billion.

Platinum companies are reeling from depressed commodity prices, which have forced them to restructure their operations. Lonmin said earlier this year it would cut production by 100,000 ounces by 2017 as part of broader measures to deal with weaker market conditions. It has already laid off 1,400 out of the targeted 6,000 employees.

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Explaining the cash offer to Aquarius, Sibanye CE Neal Froneman said the deal would add low cost and cash generative operations to Sibanye‘s asset portfolio.

“Sibanye management has a good track record and the market is taking a positive view that they would exploit the Aquarius assets appropriately,” said Mohammed Nalla, head of strategic research at Nedbank Corporate Investment Bank.

Aquarius primary assets are its stakes in the Kroondal mine and a retreatment facility Platinum Mile in Rustenburg and Mimosa mine in Zimbabwe.

The Mimosa mine is jointly owned (50%) and operated via a joint venture with a subsidiary of Impala Platinum.

The cash offer represents a premium of 62% to Aquarius‘ volume-weighted average share price of R1.64 over the last 30 days up to October 5. Aquarius‘ board has unanimously backed the deal, which is still subject to a number of conditions that include shareholder approval.

“Aquarius was in trouble and would not have seen out the weak commodity cycle,” said Drikus Combrinck, portfolio manager at Capicraft Investment Partners.

Platinum prices are hovering around the 2009 lows at about $922 per ounce, having lost about 25% from a year ago due to persistently low demand and excess supply worries.

In the same period, the JSE platinum miners‘ index has shed about 47%.