A merger between Sibanye Gold Ltd (ADR)(NYSE:SBGL) and Stillwater Mining Company (NYSE:SWC) has been concluded at a cost of $2.2 billion. In its third acquisition within the last year, the South African gold mining giant purchased the only known U.S. producer of platinum and palladium. The acquisition is a big boost to Sibanye given its ambitions to expand its precious metals holdings business.The merger now gives Sibanye the world’s fourth position in the list of producers of precious metals.
The precious metals market downturn had hit Stillwater hard
The taking over of Stillwater by Sibanye is timely given that the value of platinum and palladium has been experiencing a downward trend since 2008. The situation was so bad such that it resulted in laying off 120 employees in Stillwater’s mining complex in Montana’s Beartooth Mountains. At some point, Stillwater found itself in a $500 million debt, which Sibanye says it will take over.
Nonetheless, the acquisition has since obtained endorsement from the shareholders of the two companies. President and CEO of Stillwater, Mick McMullen says, “I am grateful for the hard work of our employees and management team in building this great company. Stillwater’s leadership team is well positioned for success as part of Sibanye.”
But the two will still work together where necessary
The completion of the sale means that Sibanye will now be part and parcel of Stillwater’s Good Neighbor Agreement with the Northern Plains Resource Council. However, this does not mean that Stillwater Mining will become the past. The chairman of the Good Neighbor Agreement task force, Jerry Iverson of Big Timber has confirmed that the two companies would continue working together where necessary.
Stillwater’s CEO Neal Froneman has also confirmed that there will be no more cutbacks of its 1400 employees.
On the other hand, McMullen and other Stillwater executives will not go home empty handed because the acquisition deal includes a compensation package. According to the SEC filings, McMullen is worth a severance package of up to $12.9 million. In the meantime, Sibanye’s stock closed at $7.45 a fall of $0.34 or 4.36%.
