SECTION A: Answer the following questions in this section $(100$ marks$)$

Read the case study and answer ALL the questions that follow.

$[100$ MARKS$]$ SIBANYE IS NOW THE WORLD'S NO$.1$ PLATINUM MINER

May $30201906$:$58$

Felix Njini, Bloomberg

Sibanye$-$Stillwater is the largest individual producer of gold from South Africa and is one of the $10$ largest gold producers globally. Sibanye$-$Stillwater is also the third largest producer of palladium and platinum. Following the proposed acquisition of Lonmin, it will further increase its production of palladium and platinum. In $2012,$ Gold Fields Limited unbundled its subsidiary, GFI Mining South Africa Proprietary Limited $("$GFIMSA$"),$ which was then renamed Sibanye Gold Limited $("$Sibanye Gold"$),$ and consisted of the KDC $($formerly Kloof$)$ and Beatrix mines, as well as an array of support service entities in South Africa. "Gold Fields stockholders were given one share in Sibanye for each of their Gold Fields shares." The three South African mines transferred from Gold Fields to Sibanye are: Beatrix gold mine, KDC mine $($formerly Kloof$)$ and Driefontein mine. On $30$ August $2017,$ Sibanye Gold Limited began trading as Sibanye$-$Stillwater and reorganized its operations by region $-$ Southern Africa and the United States. Many incidences have since happened since then. In January $2018,$ a power outage caused by poor weather resulted in nearly $1000$ miners being trapped underground. This occurred at the Beatrix gold mine near Welkom, South Africa. Some of the trapped miners were rescued the day of the incident, and the remaining $955$ were rescued after around $30$ hours when power was restored to one of the lifts. The incident has resulted in pressure from labour unions, including the National Union of Metalworkers of South Africa, for mine management to address safety concerns before it can reopen.

Six years after being carved out of a handful of unwanted gold operations, Sibanye Gold has become the world's biggest platinum miner. Building on operations spun out of Gold Fields, Sibanye became the No$.1$ miner in South Africa's waning gold industry. Now, with the acquisition of Lonmin, Chief Executive Officer Neal Froneman has completed Sibanye's transformation to a giant of the nation's key platinum sector.

The deal, approved by shareholders on Tuesday, creates a company that will eclipse Anglo

American Platinum as the world's biggest platinum miner and will rank second to Russia's MMC Norilsk Nickel PJSC for palladium output. Moreover, the Lonmin assets may be worth triple what Froneman paid for them, according to Africa's largest bank. "This makes Sibanye an integrated platinum producer at a bargain price," said Bernard Swanepoel, a former chief of Harmony Gold who now sits on the board of Impala Platinum Holdings. The Lonmin deal also gives Sibanye political clout in South Africa's mining industry, employing more than $90000$ workers and owning metal processing facilities for the first time. That heft could be important as platinum miners start negotiations with labour unions on a three$-$year wage agreement.

Tough Decisions

Still, Froneman faces some tough decisions. Before the acquisition was completed, Lonmin said $12600$ jobs were at risk, with moves already under way to cut $4100$ positions. Sibanye will review all those operations, and the CEO said the company may even consider expanding output.

"This is a culmination of a long$-$term strategy," Froneman said in an interview on Tuesday before the result of the Lonmin shareholder vote was announced. $"$It positions us in the PGMs sector where we believe in the long term future." The Lonmin deal could add about $$150$ million to Sibanye's annual cash flow, according to Morgan Stanley analysts. Froneman will need that money to start paying down the company's debt, which piled up during a string of acquisitions that extended Sibanye's platinum$-$group metals empire from South Africa to Zimbabwe and the US$.$

Massive Debt

Some analysts hope the CEO will take a timeout from his deal$-$making. "They got Lonmin very cheaply, it's a fantastic deal but unfortunately they've got a massive debt," said Rene Hochreiter, an analyst at Noah Capital Markets. "I hope they stop with acquisitions and concentrate on generating returns, but I don't think so$."$ Should market conditions allow, there are five projects Sibanye is committed to under the terms of the antitrust approval granted for the Lonmin deal.

Froneman said it's too early to say how much the company would invest. $"$We don't want to create a capital overhang in the market," he said. While the deal looks good value, bigger isn't necessarily better, according to Peter Major, a mining analyst at Cape Town$-$based Mergence Corporate Solutions. Lonmin returned to profit in the six months through March as metal prices rebounded and the rand weakened, but risks remain. $"$Do you want to buy the biggest producer, or the richest, or the one that pays the biggest dividend?