South Africa’s largest gold producer Sibanye-Stillwater is to buyout Lonmin, the world’s third biggest, but troubled platinum producer, for £285 million ($383 million), the companies announced on Thursday.
Lonmin, whose Marikana mine was the scene of the infamous 2012 mineworkers massacre where police gunned down 34 striking workers, has for the past five years been battling low platinum prices and high operating costs, exacerbated by labour unrest in South Africa.
“We believe that this offer is in the best interests of Lonmin,” said the CEO of Lonmin Ben Magara.
Despite the company boasting of great mining assets, projects and process technology and a resilient workforce, it “continues to be hamstrung by its capital structure and liquidity concerns,” said Magara.
Sibanye-Stillwater CEO Neal Froneman foresees the proposed buyout bringing about longer term benefits for both companies.
He also stated that the acquisition would “create a more robust business” that is better able to withstand volatile platinum prices and exchange rates.
News of the planned acquisition saw Lonmin’s shares, which had fallen more than 90 percent over the past five years, jump by around 20 percent in London on Thursday morning.
Sibanye was created five years ago, as a result of the unbundling of mining giant Gold Fields, and has embarked on a massive acquisition trail to expand its footprint.
In May this year, the JSE listed company bought America’s Stillwater mining company to become Sibanye-Stillwater.
Other Sibanye acquisitions include three platinum mines from Anglo American in 2015 and another Aquarius Mine in April 2016.
Both Lonmin and Anglo American had been slashing jobs in recent years, in a bid to boost margins.
South Africa is the world’s biggest producer of platinum, accounting for 70 percent of global output of the mineral which is mainly used in jewellery and catalytic converters for vehicles.
Platinum prices have dropped by about 40 percent since 2011.