Is Sibanye-Stillwater’s acquisition of platinum miner Lonmin (LMI) still on the cards? According to Lonmin – whose interim results this week painted a picture of a company in survival-mode – the transaction is set to complete by the end of 2018, following submissions to South Africa’s competition commission in March, and UK authorities last month.
Given the platinum sector’s unprofitability, the watchdogs may be minded to wave the deal through, following the lead of the South African Reserve Bank – which oversees exchange control regulations and on Tuesday gave Sibanye its assent.
Others are less convinced. Last week, analysts at Liberum Research published a note forecasting that Lonmin’s current rate of cash burn will push it into a net debt position before the end of the year, “scuppering the proposed merger before it has a chance to complete”. Sibanye chief executive Neal Froneman has said that his company’s shareholders will only approve the deal if Lonmin can remain in a net cash position, after repaying a $150m term loan.
On recent evidence, that condition looks set to be tested. Despite a 27 per cent increase in the dollar basket price for its output, Lonmin’s net cash deteriorated to $17m in the six months to March. The company maintains that this figure “would have been in-line” with the $63m on the balance sheet at the end of the December 2017, were the net cash position not impacted by the need to “lock-up” $47m of cash for a smelter outage.
