24. BORROWINGS and derivative financial instrument
SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
Borrowings
Expected future cash flows used to determine the fair value of borrowings (namely the Burnstone Debt) are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including reserves and production estimates, together with economic factors such as the expected commodity price, foreign currency exchange rates, and estimates of production costs, future capital expenditure and discount rates.
ACCOUNTING POLICY
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred, where applicable and subsequently measured at amortised cost using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
Derivative financial instruments
Derivatives are initially recognised at fair value using option pricing methodologies. Any directly attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes are generally recognised in profit or loss.
BORROWINGS
|
Figures in million - SA rand |
Notes |
2017 | 2016 | 2015 |
|
R6.0 billion revolving credit facility |
24.1 |
5,536.4 |
5,100.0 |
- |
|
US$350 million revolving credit facility |
24.2 |
1,137.1 |
1,369.0 |
- |
|
US$1.05 billion Bond |
24.3 |
12,597.7 |
- |
- |
|
US$450 million Convertible Bond |
24.4 |
4,357.1 |
- |
- |
|
R4.5 billion Facilities |
24.5 |
- |
- |
1,961.6 |
|
Burnstone Debt |
24.6 |
1,537.5 |
1,752.6 |
1,808.3 |
|
Other borrowings |
24.8 |
478.7 |
749.5 |
- |
|
Franco-Nevada liability |
|
1.7 |
2.7 |
33.7 |
|
Stillwater Convertible Debentures |
|
3.3 |
- |
- |
|
Total borrowings |
|
25,649.5 |
8,973.8 |
3,803.6 |
|
Reconciliation of the non-current and current portion of the borrowings: |
|
|
|
|
|
Borrowings |
|
25,649.5 |
8,973.8 |
3,803.6 |
|
Current portion of borrowings |
|
(1,657.5) |
(752.3) |
(1,995.3) |
|
Non-current portion of borrowings |
|
23,992.0 |
8,221.5 |
1,808.3 |
The current portion of borrowings will be repaid out of operational cash flows or it will be refinanced by utilising available Group facilities.
DERIVATIVE FINANCIAL INSTRUMENT
|
Figures in million - SA rand |
Note |
2017 | 2016 | 2015 |
|
Reconciliation of the non-current and current portion of the derivative financial instrument: |
|
|
|
|
|
Derivative financial instrument |
24.4 |
1,093.5 |
- |
- |
|
Non-current portion of derivative financial instrument |
|
1,093.5 |
- |
- |
24.1 R6.0 BILLION REVOLVING CREDIT FACILITY
On 15 November 2016, Sibanye-Stillwater cancelled and refinanced the R4.5 billion Facilities (refer to note 24.5) by drawing under the R6.0 billion revolving credit facility (RCF). The purpose of the facility was to refinance the R4.5 billion Facilities, finance ongoing capital expenditure, working capital and general corporate expenditure requirements which may include the financing of future acquisitions of business combinations.
|
Terms of the R6.0 billion RCF |
||||
|
Facility: |
R6.0 billion |
|||
|
Interest rate: |
JIBAR |
|||
|
Interest rate margin: |
During the Covenant adjustment period, being 30 June 2017 to 31 December 2018, the margin will be based on the following Net debt to adjusted EBITDA ratios: |
|||
|
|
Net debt to adjusted EBITDA ratios |
Margin % |
||
|
|
0.00:1 – 3.00:1 |
2.40% | ||
|
|
3.00:1 – 3.25:1 |
2.65% | ||
|
|
3.25:1 – 3.50:1 |
2.90% | ||
|
|
After the covenant adjustment period the margin will return to 2.4% |
|||
|
Term of loan: |
Three years |
|||
|
Borrowers: |
Sibanye Gold Limited, SRPM and Kroondal Operations |
|||
|
Security and/or guarantors: |
The facility is unsecured and guaranteed by Sibanye Gold Limited, Rand Uranium, SRPM and Kroondal. |
|||
|
Figures in million - SA rand |
|
2017 | 2016 | 2015 |
|
Balance at beginning of the year |
|
5,100.0 |
- |
- |
|
Loans raised |
|
800.0 |
5,100.0 |
- |
|
Loans repaid |
|
(363.6) |
- |
- |
|
Balance at end of the year |
|
5,536.4 |
5,100.0 |
- |
24.2 US$350 MILLION REVOLVING CREDIT FACILITY
On 24 August 2015, Sibanye-Stillwater entered into a US$300 million syndicated RCF agreement. On 15 February 2016, the facility increased to US$350 million. The purpose of the facility was to finance ongoing capital expenditure, working capital and general corporate expenditure requirements which may include the financing of future acquisitions of business combinations.
|
Terms of the US$350 million RCF |
||
|
Facility |
US$350 million RCF (2015: US$300 million RCF) |
|
|
Interest rate: |
LIBOR |
|
|
Interest rate margin |
2% per annum |
|
|
Utilisation Fees |
Where the total outstanding loans under the RCF fall within the range of the percentage of the total loan as set out below, Sibanye-Stillwater shall pay a utilisation fee equal to the percentage per annum set out opposite such percentage range. |
|
|
|
% of the total loans |
Utilisation fee |
|
|
Less than or equal to 33⅓% |
0.15% |
|
|
Greater than 33⅓% and less than or equal to 66⅔% |
0.30% |
|
|
Greater than 66⅔% |
0.50% |
|
Term of loan: |
Three years |
|
|
Borrowers: |
Sibanye Gold Limited, SRPM and Kroondal Operations |
|
|
Security and/or guarantors: |
The facility is unsecured and guaranteed by Sibanye Gold Limited, Rand Uranium, SRPM and Kroondal. |
|
|
Figures in million - SA rand |
|
2017 | 2016 | 2015 |
|
Balance at beginning of the year |
|
1,369.0 |
- |
- |
|
Loans raised |
|
1,031.4 |
2,771.5 |
- |
|
Loans repaid |
|
(1,198.2) |
(1,211.6) |
- |
|
Gain on foreign exchange differences |
|
(65.1) |
(190.9) |
- |
|
Balance at end of the year |
|
1,137.1 |
1,369.0 |
- |
24.3 US$1.05 BILLION BOND
The acquisition of Stillwater was financed by a US$2.65 billion bridge loan (Stillwater Bridge Facility) (refer to note 24.7). On 27 June 2017, Sibanye-Stillwater completed a two tranche US$1.05 billion international corporate bond offering (the Notes) and the proceeds of the bond offering were applied to the partial repayment of the Stillwater Bridge Facility raised for the acquisition of Stillwater.
|
Terms of the US$1.05 billion Bond |
|
|
Facility: |
US$500 million 6.125% Senior Notes due 2022 (the 2022 Notes) |
|
|
US$550 million 7.125% Senior Notes due 2025 (the 2025 Notes) |
|
Interest rate: |
2022 Notes: 6.125% |
|
|
2025 Notes: 7.125% |
|
Term of the Notes: |
2022 Notes: Five years |
|
|
2025 Notes: Eight years |
|
Issuer: |
Stillwater Mining Company |
|
Guarantors: |
Each of the Notes will be fully and unconditionally guaranteed, jointly and severally by the Guarantors (Kroondal Operations, Rand Uranium, SRPM and Sibanye Gold Limited). The Guarantees will rank equally in right of payment to all existing and future senior debt of the Guarantors. |
|
Figures in million - SA rand |
Notes |
2017 | 2016 | 2015 |
|
Loans raised |
|
13,109.5 |
- |
- |
|
Interest charge |
5 |
478.1 |
- |
- |
|
Accrued interest paid |
5 |
(431.5) |
- |
- |
|
Unwinding of amortised cost |
|
29.7 |
- |
- |
|
Foreign currency translation |
|
(588.1) |
- |
- |
|
Balance at end of the year |
|
12,597.7 |
- |
- |
24.4 US$450 MILLION CONVERTIBLE BOND
The Stillwater Bridge Facility was partially repaid through the US$1 billion rights offer, the Notes (refer to note 24.3) and existing cash at Stillwater. The balance was repaid through the issuance of a US$450 million Convertible Bond. The convertible bond launched and was priced on 19 September 2017.
|
Terms of the US$ 450 million Convertible Bond |
|
|
Issue size: |
US$450 million |
|
Coupon: |
1.875% |
|
Maturity date: |
26 September 2023 (six years) |
|
Conversion premium: |
35% |
|
Reference share price: |
US$1.2281, being the volume weighted average price of a share on the JSE from launch to pricing on 19 September 2017, converted at a fixed exchange rate. |
|
Initial conversion price: |
US$1.6580 |
|
Issuer: |
Sibanye Gold Limited |
|
Guarantors: |
Stillwater Mining Company and Kroondal Operations (together, the Guarantors), 100% subsidiaries of Sibanye Gold Limited. |
The US$450 million Convertible Bond has two components. The option component is recognised as a derivative liability, measured at fair value, with changes in fair value recorded in profit or loss and reported separately in the statement of financial position. The bond component is recognised as a financial liability and measured at amortised cost using the effective interest rate.
CONVERTIBLE BOND AT AMORTISED COST
|
Figures in million - SA rand |
Note |
2017 | 2016 | 2015 |
|
Loans raised |
|
4,634.5 |
- |
- |
|
Accrued interest and unwinding of amortised cost |
5 |
80.5 |
- |
- |
|
Gain on foreign exchange differences |
|
(357.9) |
- |
- |
|
Balance at end of the year |
|
4,357.1 |
- |
- |
DERIVATIVE FINANCIAL INSTRUMENT
|
Figures in million - SA rand |
|
2017 | 2016 | 2015 |
|
Derivative financial instrument recognised |
|
1,296.6 |
- |
- |
|
Gain on financial instruments |
|
(115.9) |
- |
- |
|
Gain on foreign exchange differences |
|
(87.2) |
- |
- |
|
Balance at end of the year |
|
1,093.5 |
- |
- |
24.5 R4.5 BILLION FACILITIES
Sibanye-Stillwater entered into the R4.5 billion Facilities on 13 December 2013. The R4.5 billion Facilities was used to refinance the unbundling bridge loan facilities.
|
Terms of the R4.5 billion Facilities |
|
|
Facility: |
R2.5 billion RCF |
|
|
R2.0 billion term loan facility (Term Loan) |
|
Interest rate: |
JIBAR |
|
Interest rate margin: |
RCF: 2.85% |
|
|
Term Loan: 2.75% |
|
Term of loan: |
Three years |
|
Repayment period: |
The Term Loan was repaid in equal six-monthly instalments of R250 million, with the R750 million balance and any amounts outstanding under the RCF due for settlement on final maturity, being 13 December 2016. |
|
Security and/or guarantors: |
The Facilities were unsecured and guaranteed by Rand Uranium and Ezulwini. |
|
Cancellation: |
These facilities were cancelled and repaid on 15 November 2016. |
|
Figures in million - SA rand |
Note |
2017 | 2016 | 2015 |
|
Balance at beginning of the year |
|
- |
1,961.6 |
1,979.5 |
|
Loans raised |
|
- |
1,936.4 |
1,000.0 |
|
Loans repaid |
|
- |
(3,900.0) |
(1,020.9) |
|
Unwinding of amortised cost |
5 |
- |
2.0 |
3.0 |
|
Balance at end of the year |
|
- |
- |
1,961.6 |
|
Reconciliation of facilities: |
|
|
|
|
|
RCF |
|
- |
- |
963.6 |
|
Term loan |
|
- |
- |
998.0 |
24.6 BURNSTONE DEBT
SGEO has bank debt of US$178.1 million (R1,883.9 million) (the Burnstone Debt) outstanding as part of the net assets acquired on 1 July 2014.
Terms of the Burnstone Debt
|
Facility: |
A1: US$0.2 million |
|
|
A2: US$7.8 million |
|
|
A3: US$51.0 million |
|
|
A4: US$119.1 million |
|
Interest rate: |
A1 and A2: Interest free |
|
|
A3 and A4: Interest free until 1 July 2017, then at London Interbank Offered Rate (LIBOR) |
|
Interest rate margin: |
A3 and A4: 4% from 1 July 2017 |
|
Term of loan: |
No fixed term |
|
Repayment period: |
A1: Repaid on 1 July 2014 |
|
|
A2: From 1 July 2017 the first 50% of Burnstone’s free cash flow (as defined in the settlement agreement) will be used to repay the Wits Gold Loan and the balance of 50% to repay A2 |
|
|
A3 and A4: On settlement of A2. 90% of Burnstone’s free cash flow will be used to repay the Wits Gold Loan and the balance of 10% to repay the Burnstone Debt. On settlement of the Wits Gold Loan and interest, 30% of Burnstone’s free cash flow will be used to repay the Burnstone Debt and the balance will be distributed to Wits Gold. |
|
|
The Bank Lenders will continue to participate in 10% of Burnstone’s free cash flow after the Burnstone Debt has been repaid in full to a maximum amount of US$63.0 million under a revenue participation agreement. |
|
Security: |
The Burnstone Debt is fully secured against the assets of Burnstone (of R2.0 billion) and there is no recourse to the Sibanye-Stillwater Group. The security package includes a cession over the bank accounts, insurance policies’ proceeds, special and general notarial bonds over movable assets and mortgage bonds over property. |
The Burnstone Debt facilities of US$178.1 million (R1,883.9 million) were initially recognised at the acquisition fair value using level 2 (refer note 30) assumptions, being R1,007.6 million, in terms of IFRS 3. The expected free cash flows to repay the loan as detailed above were based on the estimates and assumptions to determine the fair value:
|
· |
A US$ swap forward curve adjusted with the 4% interest rate margin above; |
|
· |
The annual life of mine plan that takes into account the following: |
- Proved and probable ore reserves of Burnstone;
- Cash flows are based on the life-of-mine plan of 18 years; and
- Capital expenditure estimates over the life-of-mine plan.
|
Figures in million - SA rand |
Note |
2017 | 2016 | 2015 |
|
Balance at beginning of the year |
|
1,752.6 |
1,808.3 |
1,134.4 |
|
Accrued interest and unwinding of amortised cost |
5 |
141.6 |
139.4 |
99.3 |
|
(Gain)/loss on revised estimated cash flows1 |
|
(181.7) |
29.3 |
162.5 |
|
(Gain)/loss on foreign exchange differences |
|
(175.0) |
(224.4) |
412.1 |
|
Balance at end of the year |
|
1,537.5 |
1,752.6 |
1,808.3 |
1 At 31 December 2017, the expected free cash flows expected to repay the loan as detailed above were revised as a result of:
• Revised proven and probable reserves;
• Revised cash flows over the life of mine plan as a result of:
◦ Revised forecast costs and capital expenditure; and
◦ Revised gold prices 2017: R545,000/kg (2016: R570,000/kg and 2015: R550,000/kg) and exchange rates 2017: R12.94/US$ (2016: R13.68/US$S and 2015: R15.00/US$).
In terms of IAS 39 AG8 the carrying value of the Burnstone Debt decreased by R181.7 million (2016: increased by R29.3 million and 2015: increased by R162.5 million), recognised as part of loss on financial instruments in profit or loss.
24.7 ACQUISITION BRIDGE FACILITIES
STILLWATER BRIDGE FACILITY
On 9 December 2016, Sibanye-Stillwater obtained a US$2.65 billion bridge facility (Stillwater Bridge Facility) to finance the purchase of Stillwater, to refinance existing indebtedness at Stillwater and to pay certain related fees, costs and expenses.
|
Terms of the Stillwater Bridge Facilities |
|
|
Facility: |
A: US$750 million bridge to equity |
|
|
B: US$300 million bridge to cash |
|
|
C: US$1.6 billion bridge to debt |
|
Interest rate: |
LIBOR |
|
Interest rate margin: |
Months 1 - 3: 3.25% per annum |
|
|
Months 4 - 6: 4.25% per annum or 5.25% per annum if Net debt to EBITDA > 2.0x |
|
|
Months 7 - 9: 5.25% per annum or 6.25% per annum if Net debt to EBITDA > 2.0x |
|
|
Months 10 - 12: 6.25% per annum or 7.25% per annum if Net debt to EBITDA > 2.0x |
|
Term of loan: |
Facility A and B: Earlier of nine months from completion of the Stillwater acquisition and 31 October 2017 |
|
|
Facility C: 364 days from completion of the Stillwater acquisition |
|
Borrowers: |
Sibanye Gold Limited and Thor Mergeco Inc |
|
Security and/or guarantors: |
The facility was unsecured and guaranteed by Sibanye Gold Limited, Thor Mergeco Inc, Kroondal Operations, Rand Uranium and SRPM. |
|
Figures in million - SA rand |
|
2017 | 2016 | 2015 |
|
Loans raised |
|
34,000.3 |
- |
- |
|
Loans repaid |
|
(33,304.0) |
- |
- |
|
Gain on foreign exchange differences |
|
(514.5) |
|
|
|
Foreign currency translation |
|
(181.8) |
- |
- |
|
Balance at end of the year |
|
- |
- |
- |
24.8 OTHER BORROWINGS
SHORT-TERM CREDIT FACILITIES
Sibanye-Stillwater has uncommitted loan facilities with various banks to fund capital expenditure and working capital requirements at its operations. These facilities have no fixed terms, are short-term in nature and interest rates are market related.
|
Figures in million - SA rand |
|
2017 | 2016 | 2015 |
|
Balance at beginning of the year |
|
749.5 |
- |
- |
|
Loans raised |
|
14,721.5 |
7,472.6 |
552.0 |
|
Loans repaid |
|
(14,992.3) |
(6,723.1) |
(552.0) |
|
Balance at end of the year |
|
478.7 |
749.5 |
- |
24.9 THE EXPOSURE TO INTEREST RATE CHANGES AND THE CONTRACTUAL REPRICING DATES
The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the reporting dates are as follows:
|
Figures in million - SA rand |
|
2017 | 2016 | 2015 |
|
Floating rate with exposure to change in JIBAR |
|
6,015.1 |
5,849.5 |
1,961.6 |
|
Floating rate with exposure to change in LIBOR |
|
2,674.6 |
3,121.6 |
1,808.3 |
|
Non-current borrowings exposed to interest rate changes |
|
8,689.7 |
8,971.1 |
3,769.9 |
|
|
|
|
|
|
|
The Group has the following undrawn borrowing facilities: |
|
|
|
|
|
Committed |
|
3,652.5 |
4,322.5 |
6,198.4 |
|
Uncommitted |
|
471.3 |
200.5 |
548.0 |
|
Total undrawn facilities |
|
4,123.8 |
4,523.0 |
6,746.4 |
|
|
|
|
|
|
|
All of the above facilities have floating rates. The undrawn |
|
|
|
|
|
committed facilities have the following expiry dates: |
|
|
|
|
|
– within one year |
|
3,188.9 |
- |
1,536.4 |
|
– later than one year and not later than two years |
|
463.6 |
3,422.5 |
- |
|
– later than two years and not later than three years |
|
- |
900.0 |
4,662.0 |
|
Total undrawn committed facilities |
|
3,652.5 |
4,322.5 |
6,198.4 |
24.10 CAPITAL MANAGEMENT
The Group’s primary objective with regards to managing its capital is to ensure that there is sufficient capital available to support the funding requirements of the Group, including capital expenditure, in a way that: optimises the cost of capital; maximises shareholders’ returns; and ensures that the Group remains in a sound financial position.
The Group manages and makes adjustments to the capital structure as and when borrowings mature or as and when funding is required. This may take the form of raising equity, market or bank debt or hybrids thereof. Opportunities in the market are also monitored closely to ensure that the most efficient funding solutions are implemented.
The Group monitors capital using the ratio of net debt to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), but does not set absolute limits for this ratio.
Net debt to adjusted EBITDA at 31 December 2017 of 2.6 exceeds the Group’s targeted ratio of net debt to adjusted EBITDA of 1.0:1 or lower. Utilising the committed unutilised debt facilities above, will impact on the leverage ratio. The borrowing facilities, permit a leverage ratio of 3.5:1 through to 31 December 2018, and 2.5:1 thereafter, calculated on a quarterly basis. Sibanye-Stillwater plans to deleverage over time back to its targeted leverage ratio of no greater than 1.0:1.
|
|
|
|
Revised |
Revised |
|
Figures in million - SA rand |
Notes |
2017 | 2016 | 2015 |
|
Borrowings1 |
24 |
25,205.5 |
7,221.2 |
1,995.3 |
|
Cash and cash equivalents2 |
21 |
2,029.8 |
928.4 |
633.4 |
|
Net debt3 |
|
23,175.7 |
6,292.8 |
1,361.9 |
|
Adjusted EBITDA4 |
|
9,045.1 |
10,270.4 |
6,234.8 |
|
Net debt to adjusted EBITDA (ratio)5 |
|
2.6 |
0.6 |
0.2 |
1 Borrowings are only those borrowings that have recourse to Sibanye-Stillwater. Borrowings, therefore, exclude the Burnstone Debt and include the derivative financial instrument.
2 Cash and cash equivalents exclude cash of Burnstone.
3 Net debt represents borrowings and bank overdraft less cash and cash equivalents. Borrowings are only those borrowings that have recourse to Sibanye-Stillwater and therefore exclude the Burnstone Debt and include the derivative financial instrument. Net debt excludes cash of Burnstone.
4 The adjusted EBITDA calculation included is based on the formula included in the facility agreements for compliance with the debt covenant formula. Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Adjusted EBITDA is not a measure of performance under IFRS and should be considered in addition to, and not as a substitute for, other measures of financial performance and liquidity.
5 Net debt to adjusted EBITDA ratio is defined as net debt as at the end of a reporting period divided by adjusted EBITDA of the 12 months ended on the same reporting date.
Reconciliation of (loss)/profit before royalties and tax to adjusted EBITDA:
|
|
|
|
Revised |
|
|
Figures in million - SA rand |
|
2017 | 2016 | 2015 |
|
(Loss)/profit before royalties and tax |
|
(6,981.2) |
4,811.4 |
1,316.0 |
|
Adjusted for: |
|
|
|
|
|
Amortisation and depreciation |
|
5,699.7 |
4,041.9 |
3,636.6 |
|
Interest income |
|
(415.5) |
(331.4) |
(257.0) |
|
Finance expense |
|
2,971.8 |
903.1 |
561.8 |
|
Share-based payments |
|
231.9 |
496.2 |
274.4 |
|
Loss on financial instruments |
|
1,114.4 |
1,032.8 |
229.5 |
|
(Gain)/loss on foreign exchange differences |
|
(292.4) |
(219.6) |
359.4 |
|
Share of results of equity-accounted investees after tax |
|
(291.6) |
(13.3) |
(116.0) |
|
Change in estimate of environmental rehabilitation obligation, |
|
248.9 |
97.5 |
- |
|
Gain on disposal of property, plant and equipment |
|
(40.7) |
(95.4) |
(58.7) |
|
Impairments |
|
4,411.0 |
1,381.1 |
- |
|
Occupational healthcare expense |
|
1,106.9 |
- |
- |
|
Restructuring costs |
|
729.8 |
187.7 |
104.8 |
|
Transaction costs |
|
552.1 |
157.0 |
25.7 |
|
Gain on acquisition |
|
- |
(2,178.6) |
- |
|
Net loss on derecognition of financial guarantee asset and liability |
|
- |
- |
158.3 |
|
Adjusted EBITDA |
|
9,045.1 |
10,270.4 |
6,234.8 |