Sibanye Agrees To Purchase Stillwater Mining For $2.2 Billion

South Africa’s Sibanye Gold Ltd. (JSE: SGL; NYSE: SBGL) is planning to expand into North America, with an agreement to purchase platinum-palladium producer Stillwater Mining Co. (NYSE: SWC) for $2.2 billion -- in an all-cash deal -- the companies announced Friday.

Sibanye, which was spun off from Gold Fields as a gold producer in 2013, last year reached agreements to expand into the platinum group metals with purchases of Aquarius Platinum and Anglo American Platinum’s Rustenburg operations.

Now, the company has agreed to buy Montana-based Stillwater – the largest producer of PGMs outside of South Africa and the Russian federation – for $18 per share. This is a 23% premium to Stillwater’s closing price on Thursday, the companies reported. Stillwater will be a wholly owned subsidiary of Sibanye.

The transaction is expected to close in the second quarter, Sibanye reported. Approval of shareholders from both companies is required.

Stillwater said the transaction was unanimously approved by its board of directors after a thorough review of “strategic opportunities” in which over 20 parties were contacted.

“We believe the transaction represents a unique opportunity for Sibanye to acquire high-quality, low-cost PGM assets which offer near-term organic growth through the anticipated ramp-up of the Blitz project,” said Neal Froneman, chief executive officer of Sibanye. “The extensive strike length of the mineralized ore body suggests that there may be further upside potential.”

Sibanye said the deal allows the company to not only add two “low-cost, steady-state” PGM mines in an “attractive mining jurisdiction,” but provides growth through Blitz. Sibanye would also be adding Stillwater’s PGM recycling operation. Stillwater’s two mines, Stillwater and East Boulder, have been in operation since 1986 and 2002, respectively. Collectively, the two mines are expected to produce between 535,000 and 545,000 ounces of PGMs in fiscal year 2016. Each mine has its own milling and concentrator infrastructure.

Development of the Blitz project is expected to be completed in early 2018, Sibanye reported. This is expected to ramp up to full production of between 270,000 and 330,000 ounces of PGMs by 2021-2022.

"This compelling all-cash transaction delivers immediate value to shareholders and appropriately recognizes the value of Stillwater's high-grade and long-life assets and world-class metallurgical and PGM recycling complex, as well as Stillwater's potential for brown-field expansions through the development of our Blitz and Lower East Boulder projects," said Mick McMullen, CEO of Stillwater Mining.