China May Be a Hitch in African Miner’s Bid for U.S. Platinumby and
South Africa’s Sibanye seeks U.S. approval for Stillwater deal
Miner’s Chinese shareholder may raise security-panel concerns
What’s to keep South Africa’s biggest gold miner from buying a U.S. palladium producer? China, perhaps.
Sibanye Gold Ltd. is seeking regulatory approval for its $2.2 billion takeover of U.S.-based Stillwater Mining Co. Adding Stillwater’s two Montana mines -- the only platinum-group operations in the U.S. and the biggest outside South Africa and Russia -- would make Sibanye the world’s third-biggest palladium producer.
A Chinese consortium owns about 20 percent of Sibanye, making it the miner’s biggest single shareholder. That may spark concerns at the U.S. body that reviews whether purchases of businesses by foreign buyers could threaten national security. That regulator -- the Committee on Foreign Investment in the U.S. -- has looked warily on some high-profile investments by Chinese investors. Palladium and platinum are among materials whose supply is monitored by the Defense Department because of their importance to military and industry applications.
Sibanye has already filed for CFIUS approval, Chief Executive Officer Neal Froneman said, noting that the company isn’t worried about the review.
"We realize the sensitivity, but the Chinese don’t control us," Froneman said in an interview in Cape Town on Tuesday. "They’re just a shareholder."
CFIUS is a secretive panel that includes representatives of the Treasury, Defense and Homeland Security departments. The group’s deliberations are private, and it declines to comment on its work even after decisions are made. There’s no indication yet of whether its reviews may differ under the administration of President Donald Trump, who has called for "America First" protectionism and attacked China over trade.
Even though Sibanye’s largest investor doesn’t have a majority stake in the mining company, its ownership could still draw CFIUS scrutiny, depending on the consortium’s ability to control company decisions. Last year, the panel decided it had jurisdiction to review Western Digital Corp.’s plan to sell a stake to China’s Tsinghua Unisplendour Corp., even though the Chinese company was buying only 15 percent of the hard-drive maker. The companies subsequently scrapped the deal.
The proposed Stillwater purchase, which would be the biggest international takeover by a South African mining company in a decade, shows how China’s increasing ownership of assets around the world can complicate transactions. A Chinese company’s bid to buy Germany’s Aixtron SE, a semiconductor-equipment supplier with business in the U.S., was blocked by the Obama administration last year.
CFIUS will want to investigate how much influence the Chinese consortium has on Sibanye’s business, said Harry Clark, a lawyer at Orrick, Herrington & Sutcliffe LLP in Washington who has worked on CFIUS reviews but isn’t involved in this one. The 20 percent stake could actually be considered controlling under some circumstances, he said. CFIUS will also want to determine how important the mine’s production is to U.S. security interests and whether it should remain U.S.-controlled, he added.
"CFIUS would no doubt take a very hard look at the situation," Clark said. "When China enters the picture these CFIUS examinations just take on a whole different character."
Platinum-group metals are used by a range of industries, including automotive, health and technology, according to a report by the National Research Council. Any restriction of their supply could disrupt these industries and delay the development of technologies aimed at reducing fossil fuel consumption and increasing energy efficiency, according to the council.
Platinum also has military applications such as aircraft turbine blades and coatings and engine seals and gaskets, according to the Strategic and Critical Materials 2015 Report on Stockpile Requirements.
Sibanye’s Chinese shareholder is Gold One Group Ltd., which is owned by several private and state-linked companies including Long March Capital Ltd. and China Development Bank Corp., according to a document provided by Sibanye spokesman James Wellsted.
"We’re not a foreign company coming to strip assets out of the U.S.," Froneman said. "We’re committed to investing. If we don’t invest, we won’t get a return."