Trade Insights

Sibanye Gold Ltd

6 October 2015 

Sibanye Gold earlier announced a cash offer for Aquarius Platinum Ltd, currently trading at 236c and up over 40% on the day, for around 266c per ordinary share. The deal will be subject to regulatory approval, but has been approved by the Aquarius board and will require shareholder approval from Aquarius shareholders at the next special general meeting but does not require the approval of Sibanye shareholders.

The transaction offers the opportunity for Sibanye to share in operational costs and overheads, benefiting from economies of scale, add to the existing platinum portfolio in Rustenburg and better operational planning through the removal of traditional lease boundaries, which previously may have hindered the best use of underground infrastructure. Aquarius runs a tightly managed, well mechanised, low cost and cash generative business, similarly in line with Sibanye’s very own operations as the lowest cost gold producer in South Africa.

Operationally the acquisition brings on board Aquarius’ Kroondal and Mimosa mines, along with a retreatment facility responsible for recovering PGMs from tailings streams from operations in the area, of which it will hold 91.7%. Both the Kroondal and Mimosa mines are some of the most cost efficient mines in South Africa and Zimbabwe respectively, with Mimosa being jointly owned 50/50 with Impala Platinum Holdings Ltd. _SENS

Technical analysis

The buyout proposition adds a healthy 62% to Aquarius’ volume weighted average share price and one would expect the Aquarius shareholders to vote in favour of the sale. It seems that with continuously depressed commodity prices and a sector under strain from depressed demand, further consolidation could be expected and perhaps a new race to become the biggest, leanest, low cost producer could be the key to survival in what is a very challenging space. The market has reacted positively to the news and whilst Aquarius is up over 40%, Sibanye is currently trading up 9% on the day. Interestingly enough the move now starts to bring greater validation to the double bottom, indicative of a reversal in trend, which was previously down having lasted over eight months from the highs of over 3300c.

All eyes will now be on Aquarius’ voting shareholders and the regulators to give this deal the go-ahead. Neal Froneman runs a tight ship and with the recent acquisitions in the platinum space, it allows Sibanye to spread their risk and take advantage current market conditions. Whilst I am not a fan of the resource sector with all of its external issues and pressures from Eskom to labour conflicts, I think Sibanye may be one to watch. Leigh Riley, Premium Client Manager