AQP Aqua Plat Fpo 5Cus (delisted)

By Alex MacDonald

LONDON--Sibanye Gold Ltd. (SGL.JO) said Tuesday it has offered $294 million to buy South Africa's Aquarius Platinum Ltd (AQPTY) in cash, making this the company's second big platinum bet in less than a month as prices for the precious metal fall and costs rise.

The deal would make South Africa's largest gold producer by output also the world's fifth-largest platinum producer with annual production of more than one million platinum equivalent ounces.

This would mark Sibanye's second platinum deal since Sept. 9 when it agreed to acquire the labor-intensive Rustenburg mine operations from Anglo American PLC (AAL.LN) for at least 4.5 billion South African rand ($324 million).

Sibanye is delving into the platinum sector just as the industry is due to brace for another round of potentially heated wage negotiations next year. Last year, South Africa's platinum companies suffered a five-month strike over wages and benefits that crippled the country's platinum industry and dented its economy.

Under the current deal, Aquarius shareholders will receive $0.195 a share, or roughly 12.9 pence a share in cash, representing a 60% premium to Aquarius's closing share price of GBP0.08 on Monday, the trading day prior to the announcement.

The deal has been unanimously backed by Aquarius board and is forecast to close in the first quarter of 2016, although it still needs approval from Aquarius shareholders.

Aquarius's shares in London closed 37% higher at 11 pence share on the news, while Sibanye's shares rose 10% to ZAR19.74 a share.

For Sibanye, the deal gives the mining company access to two low-cost mechanized mines in South Africa and Zimbabwe, the world's top-two countries by platinum reserves. Sibanye said it remains positive about the platinum market outlook over the long term despite near-term uncertainty about pricing.

"We do think that PGM pricing headwinds may persist for slightly longer period [but] that doesn't frighten us....Even with the Volkswagen AG fallout...we will see an accelerated normalization of inventory" as platinum demand grows and South African supply remains restricted, said Neal Froneman, Sibanye's chief executive in a call with analysts.

For Aquarius, the deal represents an exit from an industry whose near-term prospects have worsened as a result of Volkswagen AG's falsification of U.S. diesel-car emissions tests. This sent the platinum price down to a near-seven year low last week as investors fretted that diesel-car sales, a key driver behind platinum demand, could ebb in the near term.

Mr. Froneman said his company should be able to extract notable cost savings by combining Aquarius's Kroondal mine in South Africa with the adjacent Rustenburg mine, thereby justifying the premium offered for Aquarius.

The Aquarius deal would also give Sibanye a foothold in Zimbabwe, which hosts the second-largest platinum reserves in the world after South Africa.

"At higher platinum group of metal prices, these assets...offer a substantial increase in earnings and value for Sibanye shareholders," Mr. Froneman added.

Write to Alex MacDonald at alex.macdonald@wsj.com

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(END) Dow Jones Newswires

October 06, 2015 16:01 ET (20:01 GMT)

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