The Marikana mines in Sibanye-Stillwater are flourishing, something they did not do in the hands of Lonmin in the past few years.
The Marikana mines, the concentrating and refining complex and other assets were bought for just R4.3bn in equity when Sibanye took over Lonmin, which was for years the world’s third-largest platinum miner. The mines now account for nearly half of the earnings generated from the company’s SA platinum group metals (PGM) mines.
Lonmin went to the wall twice. It had to undertake a hugely dilutive and discounted rights offer to stave off failure and then it continued its dive only for Sibanye to step in and buy the whole company, much to the relief of Lonmin shareholders.
Sibanye CEO Neal Froneman has spoken of how management wrested control of the mines back from union leaders by giving back the right to manage to the right people.
It is easy to understand why Lonmin forfeited this right, having been run virtually into the ground by the unions, most particularly the Association of Mineworkers and Construction Union (Amcu), which called damaging strikes that contributed to the demise of the company.
Sibanye has taken ownership of what were the Rolls-Royce platinum group metal mines in SA. The problem is that with Lonmin in such dire financial straits there is a lot of catch-up capital to spend on development and maintenance, but with Sibanye’s immense cash-generating capacity as evidenced in the interim period, that is not a problem.
In Sibanye, these mines will once again be solid assets to own.
Not only that, but Lonmin partially built a big mine called K4. For a few billion rand more Sibanye will have what Lonmin management saw as a true jewel in the company’s crown.
Lonmin shareholders and employees should be grateful Sibanye had the guts to take on a failing company and difficult mines, labour and community relationships to turn it into a profitable, sustainable venture.
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