Sibanye-Stillwater’s balance sheet is set to suffer a R3.7bn hit after the miner agreed to settle its drawn-out legal brawl with London-based Appian Capital Advisory out of court.
The $215m (R3.69bn) settlement, roughly the same value as Sibanye’s latest interim loss, all but wipes out the group’s SA gold earnings for the September quarter, threatening to deepen its full-year loss and divert billions away from potential dividends or growth opportunities.
However, settling out of court, a move made possible by soaring precious metal prices, allows the company to avoid a looming trial, slated for Monday, which would have determined how much it really owed the private equity firm.
Sibanye’s dispute began in early 2022 when the precious metals heavyweight was dragged to court after illegally withdrawing from its $1.2bn offer to buy two of Appian’s Brazilian nickel and copper mines.
While Sibanye argued that an unforeseen geotechnical event rendered the offer null and void, the move backfired when London’s high court ordered the SA miner to compensate Appian in late 2024.
After four years of courtroom drama and about £5m in legal fees, the company is now forced to pay nearly a fifth of its initial offer to Appian without enjoying any of the mooted deal’s benefits.
At R3.7bn, the compensation is roughly equal to Sibanye’s SA gold earnings before interest, tax, depreciation and amortisation (ebitda) in the three months to end-September and equates to nearly 40% of the group’s quarterly earnings overall.
Still, Sibanye CEO Richard Stewart was optimistic about the agreement putting an end to any further legal processes. He said the settlement would “provide certainty for the group and its stakeholders, removing a market overhang of close to four years”.
The trial and settlement were among the first public challenges faced by Stewart since he took over the company from former CEO Neal Froneman last month.
The R3.7bn loss comes at a vulnerable time for Sibanye, as it continues to rebuild from three years of suppressed platinum group metal (PGM) prices and recent restructurings at its ageing local gold shafts.
At the same time, record gold prices and a recent surge in PGM prices have added more than 200% to the company’s market value and freed up significant cash, potentially allowing it to avoid a more expensive outcome. Until Monday, Sibanye had steadfastly defended its decision to pull out of the Appian offer.
Anglo American may hope for a similar outcome as it peers down the barrel of a long and costly arbitration process with American coal miner Peabody over their failed $3.8bn deal.
Earlier this month Peabody told investors it aimed to spend about $5m annually on legal fees as it sought compensation over the deal, which Anglo terminated in August after a fire at one of the US miner’s main assets.
“The parties have invested significant time, effort, and resources into this dispute and are pleased to have resolved the matter ahead of the quantum trial, which was due to begin today,” said Sibanye on Monday.
“The board and management are convinced that the settlement of this protracted legal dispute is in the best interests of the group and all its stakeholders,” said Stewart.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.