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SIBANYE GOLD LIMITED - Sibanye-Stillwater enters into streaming agreement with Wheaton International

Release Date: 16/07/2018 13:32
Code(s): SGL     PDF:  
Wrap Text
Sibanye-Stillwater enters into streaming agreement with Wheaton International

Sibanye Gold Limited
Trading as Sibanye-Stillwater
Incorporated in the Republic of South Africa
Registration number 2002/031431/06
Share code: SGL
ISIN – ZAE000173951
Issuer code: SGL
(“Sibanye-Stillwater” or “the Group” or “the Company”)

Sibanye-Stillwater enters into streaming agreement with Wheaton International

Johannesburg, 16 July 2018: Sibanye-Stillwater (Tickers JSE: SGL and NYSE: SBGL) is
pleased to announce that it has secured a US$500 million upfront cash payment (the
Advance Amount) through a streaming agreement with Wheaton Precious Metals
International Ltd (“Wheaton International”), a wholly-owned subsidiary of Wheaton
Precious Metals Corp. In return, Sibanye-Stillwater has committed to deliver a
percentage of gold and palladium produced from its United States (“US”) Platinum
Group Metals (“PGM”) operations (comprising its East Boulder and Stillwater mining
operations) (the “Transaction”). The Transaction is effective from 1 July 2018.

Transaction rationale

-   Delivering against short term strategic goals -the US$500 million upfront cash
    payment, immediately reduces Sibanye-Stillwater’s leverage, decreasing Net
    Debt:Adjusted EBITDA1 by between 0.6x and 0.7x, which will reduce the current
    Group leverage ratio to a level well below both the current covenant (3.5x) and
    future covenant (2.5x) ratios.

-   Improved capital structure and reduced financing cost - the streaming agreement
    is a long-term financing instrument with no repayment of any of the Advance
    Amount under any circumstances and no minimum delivery obligations, at a cost
    that is lower than the Company’s alternatives in international capital markets.

-   Crystalizes significant value from Stillwater - the Transaction ensures the
    realisation of significant value uplift from the US PGM operations for Sibanye-
    Stillwater shareholders, by crystalizing the value of by-product gold
    production and the 31% increase2 in the palladium price since the Stillwater
    Mining Company (Stillwater) transaction was announced on 9 December 2016.

CEO, Neal Froneman commenting on the Transaction said, “The streaming transaction
is further delivery on our strategic commitments and validates the value we
identified in the Stillwater assets. Importantly the transaction results in a
significant reduction in Group leverage, improving flexibility and reducing
financing costs and risk. We are extremely pleased to have secured this
competitively priced financing arrangement with a company of the quality of
Wheaton International.”

Key Transaction terms
Wheaton International will advance an upfront cash payment of US$500 million to
Sibanye-Stillwater on closing of the transaction, which is expected soon after the
announcement date. Closing of the Transaction is subject to the completion of
certain corporate matters which are administrative in nature.
In addition to the Advance Amount, Wheaton International will pay Sibanye-
Stillwater 18%5 of the spot palladium and gold prices for each ounce delivered
under the streaming agreement until the Advance Amount has been reduced to nil
through metal deliveries. Thereafter, Sibanye-Stillwater will receive 22%5 of spot
US$ palladium and gold prices for each ounce of palladium and gold delivered.
Sibanye-Stillwater has committed to deliver3 to Wheaton International the
equivalent of:

-   100% of gold production from the US PGM operations over the life of the US PGM
    operations

-   Annual palladium production from the US PGM operations equivalent to:

    -   4.5% of production, until (i) a cumulative amount of 375 koz having been
        delivered, and (ii) the portion of the Advance Amount which is attributable
        to palladium deliveries having been reduced to nil through such deliveries.

    -   thereafter, the equivalent of 2.25% of production, until (i) a further 175
        koz having been delivered (or cumulatively 550 koz having been delivered),
        and (ii) the Advance Amount having been reduced to nil through metal
        deliveries

    -   thereafter and continuing for the life of the operations, 1.0% of palladium
        production

The stream includes a completion test on the development of the Blitz Project,
including completion of underground development, critical surface infrastructure
and expansion of the concentrator production output.

Transaction benefits

-   The Transaction further optimises the Group’s capital structure by diversifying
    Sibanye-Stillwater’s sources of funding, while immediately strengthening the
    Group’s balance sheet and reducing net leverage.

-   The stream has been structured at a cost which is competitive with regards to
    the Group’s current funding and lower than the Group’s current options in
    international capital markets.

-   The Transaction crystalizes significant value from gold by-product production
    from the US PGM operations, reducing the amount of primary PGM production
    required to raise the Advance Amount. Gold production over the life of mine
    plan represents approximately 43% of the stream value4, while palladium
    contributes the remaining 57% of the stream value4. Platinum production is
    excluded from the streaming agreement.

-   The streaming agreement provides Sibanye-Stillwater with a long-term funding
    instrument that is linked to the operational performance of the US PGM
    operations and to the performance of the underlying commodities.

-   Sibanye-Stillwater’s obligations under the stream are limited to delivery of a
    percentage of actual production, without repayment of the Advance Amount under
    any circumstances, and without minimum deliveries. This introduces a funding
    instrument with limited obligations, minimising any potential for default.

-   The declining obligation for Sibanye-Stillwater to provide palladium to Wheaton
    International (from 4.5% to 2.25% to 1.0%) when certain milestones are reached,
    ensures greater exposure to spot prices over the long term, reduces long term
    financing requirements and encourages ongoing growth and exploration at the US
    PGM operations.

-   There is limited cost variability as price and volume increases do not
    materially impact on the stream cost. Ultimately the stream requires a greater
    than 27% increase in spot US$ palladium and gold prices simultaneously for the
    implied cost of stream to match the Group’s current cost of term debt4.

Investment to advance safe technology
Sibanye-Stillwater has developed several safety initiatives, including an
investment into research in technology to improve safety in mining. These
initiatives prioritise the use of digital technology for enhanced safety
applications including focus areas of seismicity and pro-active monitoring of
underground environmental conditions. With the support of Wheaton International,
Sibanye-Stillwater has committed R30 million over three years to support safety
initiatives which facilitate the fast tracking of certain technology prototypes
into Sibanye-Stillwater’s underground mining environment.


Conference call and audio webcast with presentation slides
Sibanye-Stillwater management will provide further detail on the Transaction via
an audio webcast at 16:00 CAT/10:00 EST today. A conference call option will run
concurrently. The presentation file is available on www.sibanyestillwater.com.

Webcast link:     http://themediaframe.eu/links/sibanye180712.html

Conference call numbers:
Johannesburg (Telkom) +27 (0)10 201 6800
Johannesburg (Neotel) +27 (0)11 535 3600
United Kingdom 0 333 300 1418
United States and Canada    1 508 924 4326
Replay numbers and code:
South Africa:   010 500 4108
UK: 0 203 608 8021
Australia: 073 911 1378
USA: 1 412 317 0088
International: +27 10 500 4108
Replay Access Code:   15210

For more information, please email ir@sibanyestillwater.com

Footnotes:
1. For the purposes of calculating the Net Debt: Adjusted EBITDA ratio, Adjusted EBITDA is calculated
over the immediately preceding 12 months. Net Debt excludes Burnstone cash and debt due to the non-
recourse nature of the financing as explained in the 2017 Annual Financial Statements. Adjusted EBITDA
as reported is an accounting calculation based on financial results from the date of acquisition and
consolidation
2. Spot prices at 30 June 2018 of US$1,253/oz (gold) and US$953/oz (palladium)
3. For the 10 years starting in 2019, production attributable to Wheaton International is forecast to
average approximately 14.5 koz of gold and 29 koz of palladium per year. For the 20 years starting in
2019, production attributable to Wheaton International is forecast to average approximately 14.7 koz
of gold and 24 koz of palladium per year. The forecast is based on the Competent Persons Report for
the US PGM Operations published in November 2017 and available at
https://www.sibanyestillwater.com/investors/documents-circulars
4. Assumes spot prices at 30 June 2018 of US$1,253/oz (gold) and US$953/oz (palladium), discounted at
a weighted cost of capital of 7.5% (real)
5. Production payments may reduce if debt covenants exceed 3.5x Net debt:Adjusted EBITDA
Contacts:
Email: ir@sibanyestillwater.com

James Wellsted
Head of Investor Relations
+27 (0) 83 453 4014

Sponsor: J.P. Morgan Equities South Africa (Proprietary) Limited



Advisors

Citi is acting as financial advisor to Sibanye-Stillwater. Fasken Martineau
DuMoulin LLP, Linklaters LLP, and Webber Wentzel are acting as legal advisors to
Sibanye-Stillwater.

FORWARD LOOKING STATEMENTS
This announcement contains forward-looking statements, including “forward-looking
statements” within the meaning of Section 27A of the U.S. Securities Act of 1933
and the “safe harbour” provisions of the United States Private Securities
Litigation Reform Act of 1995. Forward-looking statements may be identified by the
use of words such as “target”, “will”, “would”, “expect”, “can”, “potential”,
“could” and other similar expressions that predict or indicate future events or
trends or that are not statements of historical matters. These forward-looking
statements, including among others, those relating to our future business
prospects, financial positions, debt position and our ability to reduce debt
leverage, plans and objectives of management for future operations, plans to raise
capital through streaming arrangements or pipeline financing, our ability to
service our Bond Instruments (High Yield Bonds and Convertible Bonds), our ability
to achieve steady state production at the Blitz project and the anticipated
benefits and synergies of our acquisitions are necessarily estimates reflecting
the best judgement of our senior management and involve a number of known and
unknown risks, uncertainties and other factors, many of which are difficult to
predict and generally beyond the control of Sibanye-Stillwater, that could cause
Sibanye-Stillwater’s actual results and outcomes to be materially different from
historical results or from any future results expressed or implied by such
forward-looking statements. As a consequence, these forward-looking statements
should be considered in light of various important factors, including those set
forth in the Group’s Annual Integrated Report and Annual Financial Report,
published on 30 March 2018, and the Group’s Annual Report on Form 20-F filed by
Sibanye-Stillwater with the Securities and Exchange Commission on 2 April 2018
(SEC File no. 001-35785). These forward-looking statements speak only as of the
date of this announcement. Sibanye-Stillwater undertakes no obligation to update
publicly or release any revisions to these forward-looking statements to reflect
events or circumstances after the date of this announcement or to reflect the
occurrence of unanticipated events, save as required by applicable law.

Citi is acting for Sibanye-Stillwater and no one else in connection with the
Transaction and will not be responsible to anyone other than Sibanye-Stillwater
for providing the protections afforded to clients of Citi or for providing advice
in relation to the Transaction.

Date: 16/07/2018 01:32:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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