Sibanye Gold expands platinum assets by buying Stillwater in $2.2bn deal

South Africa’s Sibanye Gold (JSE:SGL) (NYSE:SBGL) is buying Stillwater Mining (NYSE:SWC), the only US platinum producer, in a cash deal worth $2.2 billion, a figure higher than the target firm’s current market value.

The miner, the biggest gold producer in South Africa, has spent most of the year shopping for new mines, particularly in the platinum sector. Last year, it made its first incursion in the market by acquiring Aquarius Platinum and three Anglo American Platinum mines.

Together with reducing Sibanye’s dependence on its aging South African assets, the deal will make the company the world's third largest palladium producer.

Shares in Stillwater, which operates in Montana and is the largest primary producer of platinum group metals (PMGs) outside South Africa and Russia, soared on the news. The stock was trading almost 19% higher to $17.44 at 10:18 am ET.

Sibanye’s shares, instead, took quite the dip, as investors reacted negatively to the firm’s decision to pay a higher-than-market-value price for the US platinum miner. The stock closed 15% lower on Friday in Johannesburg and was nose-diving in New York at 10:22 am, -15.25% to $7.09.

Sibanye will pay $18.00 per share in cash for Stillwater, a 23% premium over Thursday's closing price, which it was initially financing through a $2.675 billion loan arranged by HSBC and Citigroup.

"These are some of the lowest cost ounces in the world," chief executive Neal Froneman said in a statement, referring to Stillwater's assets.

Together with reducing Sibanye’s dependence on its aging South African mines, the deal will make the company the world's third largest palladium producer and fourth biggest platinum group metals miner, Froneman noted.

Sibanye will fund the acquisition through $2.7 billion in loans from Citigroup Inc. and HSBC Holdings Plc and will pay back $500 million of Stillwater’s convertible debt. The company will also raise at least $750 million in a share sale.