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Sibanye Gold Agrees To Buy Aquarius Platinum For $294 Million

(Kitco News) - Sibanye Gold Ltd. (NYSE: SBGL;  JSE: SGL) continued its foray into the platinum market Tuesday when South Africa’s largest gold producer announced an agreement to buy Aquarius Platinum Ltd. for $294 million.

The move comes on the heels of an announcement last month that Sibanye bought Anglo American Platinum’s Rustenburg mine, which is the world’s largest platinum mine.

Sibanye announced a cash offer of $0.195 per share (ZAR 2.66) for all shares of Aquarius. In its announcement, Sibanye said the Aquarius board of directors recommended that Aquarius shareholders vote in favor of the offer at a special meeting, which is yet to be scheduled.

“The acquisition of Aquarius is consistent with Sibanye’s strategy to secure value accretive, cash flow enhancing opportunities, which support its dividend strategy,” said Neal Froneman, chief executive officer of Sibanye. “The transaction is highly complementary with the Rustenburg acquisition, which we recently announced. Significant additional value can be realized from optimizing inherent regional and operational synergies between Aquarius’ Kroondal mine and the Rustenburg operations, which are adjacent to it.”

At higher prices for platinum group metals, Froneman said he envisions that these assets will “substantially increase earnings.”

Sibanye struck the deal at a time when platinum prices have sagged, most recently hurt by worries that a Volkswagen emissions scandal will hurt demand for the metal, used for auto catalysts in diesel-powered engines. Nearby, platinum futures on the New York Mercantile Exchange last week fell to $893.40 an ounce, the lowest level since late 2008.

Analysts at Citi Research termed the Aquarius transaction a “positive development” for Sibanye.

“It is making acquisitions in a fundamentally attractive industry at what we view the trough of the cycle,” Citi said. “We believe this will serve shareholders well longer term. Having said that, we maintain our cautious outlook on its gold assets.”

Aquarius owns stakes in the Kroondal mine and Platinum Mile retreatment facilities near Rustenburg in South Africa and the Mimosa joint venture with Impala Platinum in Zimbabwe. Kroondal and Mimosa are both free-cash-flow positive, Citi said, adding that Mimosa is “amongst the most FCF generative mines in the platinum industry.”

BMO Capital Markets said Sibanye is effectively purchasing Aquarius for $225 million, considering the latter had a cash balance above liabilities of $69 million at the end of June.

“With the proposed acquisition of Amplats’ Rustenburg assets, the acquisition of Aquarius’ Kroondal mine provides consolidation and synergy opportunities for Sibanye, possibly a key point for the transaction,” BMO said.

By Allen Sykora of Kitco News;



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