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Alberto Abaterusso
Alberto Abaterusso
Articles (1293) 

Sibanye Gold Falls After South African Reserve Bank Approves Acquisition

Sibanye hopes to buy Lonmin PLC in a transaction that is expected to close later this year

May 16, 2018 | About:

Shares of Sibanye Gold Ltd. (NYSE:SBGL) collapsed 8% and closed at $2.91 following the company’s announcement that the South African Reserve Bank has approved its acquisition of Lonmin PLC (LMI)

The transaction is expected to close in the second part of 2018 and requires approval from shareholders and authorities in the United Kingdom and South Africa.

Lonmin is a platinum group metals mining company. The South African miner is also engaged in exploration and refining activities. Besides platinum, palladium and rhodium, Lonmin also explores for gold and for base metal deposits, such as chrome, nickel, copper and cobalt. The metal production is conducted in the South African market, in the Americas, Asia and Europe. Marikana mine in South Africa is the company’s crown jewel. In that area, the company has held a mining license for 20 years. The license also can be renewed for another 30 years.

Lonmin’s mineral reserves host approximately 32 million ounces of platinum, palladium, rhodium and gold (4PGE). The mineral resources account for 181 million troy ounces of 4PGE.

For full fiscal 2018, Lonmin expects a production of 650,000 to 680,000 ounces of platinum at approximately $1,005 per ounce. The company forecasts about $120 million in capital expenditures.

The company has cash-on-hand of about $340 million and a debt of about $203 million.  Lonmin's debt to equity ratio is 41.44 and the current ratio is 1.64.

The company is reporting 282.74 shares outstanding, of which 95% is float. Lonmin is trading at 68 cents per share and has a market capitalization of approximately $191 million.

The price-book ratio is 20.61 times and the enterprise value to earnings before interest taxes amortization and depreciation ratio is 0.83 times versus an industry median of 5.59 times. The 12-trailing months Ebitda margin is 3.6% versus an industry median of 25%.

Sibanye Gold

Sibanye CEO Neal Froneman commented: “We are pleased to have received this important regulatory approval in a timely manner, which takes us another step closer to concluding this important transaction. Management remains focused on ensuring that the remaining conditions are met and will notify stakeholders as further progress is made.”

Sibanye is currently trading at $2.91 with a market capitalization of $1.72 billion, a price-book ratio of 0.25 times versus an industry median of 2.06 times and an enterprise to earnings before interest, taxes, depreciation and amortization of -8.06 times.

For the 52-weeks through May 16, the South African miner lost 64% and is currently trading below the 200, 100 and 50-SMA lines. Sibanye's 52-week range is $2.82 to $8.32.

Sibanye has a forward dividend of 41 cents for a yield of 10.50%.

The recommendation rating is 3 out of a total of 5.

Disclosure: I have no positions in any stock mentioned in this article.

About the author:

Alberto Abaterusso
If somebody asks what being a Value Investor means, Alberto Abaterusso would answer: “the Value Investor is not the possessor of a security that represents the company, but he is the owner of that company. As an owner of the company the Value Investor is actively involved in the dynamics of that company and his first aim is how to have sales progressively growing.”

Alberto Abaterusso would add: “probably the Value Investor is one of the least patient persons in the world concerning sales.”

Alberto Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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