Sibanye cuts billions of rand in debt from the failed BEE structures of Lonmin
Sibanye-Stillwater has more than halved billions of rand of debt held by empowerment partners in the mines and plants formerly owned by Lonmin.
Sibanye bought the whole of the world number three platinum producer in 2019, cementing its position as the world’s largest source of mine-to-market platinum group metals (PGMs) and bringing the undercapitalised assets to account since then.
By the time of the takeover, Lonmin was a 20-year-old company in dire financial circumstances, unable to raise more debt from its shareholders or financial institutions. Due to its poor finances there was little to no benefit for its empowerment partners let alone money to repay debt advanced to them.
Lonmin is also synonymous with the 2012 massacre of 34 people by police near the company’s Marikana assets after the death of 10 people in violent labour unrest.
Sibanye is trying to reclaim the Marikana anniversary by changing its relationship with communities, empowerment partners and labour. It has called the Lonmin assets Marikana. They are the standout mines in the company’s PGM portfolio in SA, Zimbabwe and the US.
In the latest development, Sibanye said it has restructured Lonmin’s debt-laden empowerment structures, writing off debt held in these entities by more than half and putting in a trickle flow of 10% of dividends generated by the Lonmin assets, creating the first, albeit limited, revenue streams for communities and empowerment partners until the newly reduced debt levels are repaid.
Once the debt is repaid, the empowerment entities will receive full dividends.
Sibanye will only release the financial quantum of these transactions, including the levels of debt held by the empowerment structures, the size of the write-off and remaining debt, when it releases its interim results after June, said spokesperson James Wellsted.
The debt levels before the restructuring were “significant … billions of rand”, he said, declining to be more specific but noting the size of the debt was such it was unlikely to be repaid.
“The revised structure will allow for a sustainable capital structure for the Marikana [broad-based BEE] shareholders, as well as immediate access to distributable cash flow and the ongoing transfer of tangible value,” said Sibanye CEO Neal Froneman.
Lonmin was struggling with its empowerment structures, which were unable to repay debt after a transaction signed in 2003.
In its 2016 annual report, Lonmin noted its empowerment partner Phembani owed the company $376m, which, at the prevailing exchange rate now, equates to R5.4bn. The $376m loan had been granted to Shanduka Resources Group, which then merged with Phembani.
Phembani’s debt was secured by its holding in Incwala Resources, which held investments in Lonmin’s subsidiaries. The 2016 annual report says there “had not been any substantial dividend payments to Incwala in recent times”.
Lonmin made a $307m provision against the loan, realising it was unlikely to be repaid. Most of the loan was for Phembani to buy a 50.03% stake in Incwala and provided Lonmin “with its BEE credits”.
The size of loans held by the Bapo community and the Public Investment Corporation is unclear and Wellsted declined to speak of them, citing confidentiality agreements.