Sibanye-Stillwater is contemplating providing Australian miner New Century with up to $30m in funding after the zinc miner ran into liquidity problems after heavy rains halted production, creating a production shortfall.
New Century is on the verge of being taken over by Sibanye, led by serial dealmaker Neal Froneman.
New Century chair Kerry Gleeson said in a letter to shareholders said that rains in Northwest Queensland had affected operations at the Century Operation and Karumba Port Facility and that this was likely to have affect the company's short-term liquidity position.
The mining house halted production two weeks ago at the operations and said it expected work to resume in April.
“At this stage the production impact for the 2023 financial year is expected to be in the range of 15-20 kilotonnes of zinc metal. The impact of this production shortfall is likely to impact New Century’s short-term liquidity position. As such, New Century is engaging with Sibanye and Sibanye Australia in respect of mitigating key operational and business risks, including short term liquidity issues,” Gleeson said.
“Sibanye and Sibanye Australia have confirmed that they are committed to working with New Century to ensure New Century remains in a position to pay its debts as and when they become due and payable and subject to agreement on legal documentation (including approval from the Sibanye and Sibanye Australia boards of directors and other relevant approvals), to providing or procuring a funding solution up to $30m, subject to New Century providing certain information.”
Sibanye first announced its intention to swoop on the company in February after it put forward a R1.5bn unsolicited offer to buy the 80% of New Century it did not own, saying it was unhappy with the company’s strategic direction.
Sibanye, which had a 19.9% stake in New Century at the time of the unsolicited offer, has since rapidly increased its holding in the company to 78.3%.
The Johannesburg-based group is 11% shy of meeting the 90% threshold required to compulsorily acquire all outstanding shares in New Century. The board of the Aussie company, which initially advised its shareholders to take no action, has since recommended that they accept the Sibanye offer.
New Century on Wednesday suspended trade in its shares on the Australian Securities Exchange as Sibanye closed in on sealing the deal to acquire the company.
Beneficial to all
Gleeson spelt out why a takeover by Sibanye was beneficial to all parties, saying a material uncertainty existed that might cast doubt on New Century’s ability to continue as a going concern as a stand-alone entity.
She highlighted an environmental bond facility (EBF) with Argonaut Insurance and Macquarie Bank where New Century is required to amortise a further $160m under an agreed amortisation schedule with the first A$10m payment due on April 3 2023 and the final completion date in April 2025.
“There is no guarantee that New Century will generate sufficient profits from operations to meet its amortisation obligations under the EBF, assuming it is not replaced by an alternative mechanism or a renegotiated amortisation profile in due course,” Gleeson said.
“While Sibanye’s intentions in respect of these matters, including the holding or replacement of the EBF, is unknown and Sibanye’s general intentions remain subject to a general strategic review, the board considers it possible that Sibanye’s position as a controlling shareholder of New Century may provide New Century alternative options to address these matters. Though at this stage there is no certainty as to how Sibanye may exercise its rights as a controlling shareholder.”
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