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Rating Action:

Moody's downgrades Sibanye-Stillwater to Ba3; negative outlook

19 Feb 2019

London, 19 February 2019 -- Moody's Investors Service ("Moody's") has today downgraded Sibanye Gold Limited's (Sibanye-Stillwater) corporate family rating (CFR) to Ba3 from Ba2 and probability of default rating (PDR) to Ba3-PD from Ba2-PD. Concurrently, the ratings on the senior unsecured notes due in 2022 and 2025 issued by Stillwater Mining Company and guaranteed by Sibanye-Stillwater have been downgraded to Ba3 from Ba2. The outlook is negative.

A full list of affected ratings is provided towards the end of this press release.

RATINGS RATIONALE

Today's rating action reflects Moody's view of increasing downside risks for Sibanye-Stillwater's credit profile as a result of challenging operating conditions in South Africa and increasing refinancing risks for the company as its ZAR6 billion revolving credit facility (RCF) matures in November 2019. Improvement in credit metrics that was anticipated by Moody's will take longer than expected as the company has faced underperformance in gold operations because of safety incidents in H1 2018 and a union strike since 21 November 2018. For the last twelve months (LTM) ending 30 June 2018, Moody's adjusted debt/EBITDA stood at 3.7x while (cash flow from operations (CFO)-dividends)/debt stood at 11.9%.

While recognizing the company's demonstrated ability to successfully navigate challenging operating conditions, the unresolved strike at Sibanye-Stillwater's gold mines has been going on for significantly longer than what Moody's would have anticipated in the current situation and reflects heightened operating risks for the company. The platinum group metals (PGM) operations in South Africa have so far been largely unaffected by strikes and therefore remain profitable. The failure to contain and resolve the ongoing strike action, or strikes spreading to the South Africa PGM mines would deteriorate credit quality further. The company's PGM assets in Montana, USA meanwhile is a key credit strength for the company in light of record high palladium prices and increasing production levels.

While not Moody's base case, the rating agency believes that Sibanye-Stillwater could be exposed to further event risks in the near future as a result of the currently challenging labour environment. Wage negotiations in the platinum group metals (PGM) sector are expected to start in mid-2019 and the decision to acquire Lonmin Plc, a PGM producer in South Africa which has plans to restructure a substantial portion of its workforce, is also currently scheduled to be made prior to 30 June 2019. In addition, South Africa is facing challenges in its power sector and there is heightened uncertainty around degree of electricity tariff increases and power interruptions which could increase costs and lead to production disruptions respectively.

Sibanye-Stillwater's ZAR6 billion and $600 million RCFs have a net debt/EBITDA financial covenant of 3.5x that will step down to 2.5x after 31 December 2019. Moody's estimates that due to the operational disruptions the company will be close to or exceed the 3.5x level at the next measurement date on 31 March 2019. Moody's approach to liquidity analysis assesses a company's ability to meet its funding requirements under a conservative scenario of not having market access to new funding over the next 12-18 months. Under this approach, the rating agency sees Sibanye-Stillwater's refinancing risk increasing as the company's almost fully utilized ZAR6 billion RCF matures in November 2019.

In order to improve its capital structure and liquidity profile, the company took several positive measures in 2018 including refinancing and upsizing its dollar RCF as well as entering into a $500 million streaming agreement. While the maturing rand RCF is compensated by the approximately $410 million that remains available under the dollar RCF that matures in April 2021, any near-term event risks or adverse market conditions is likely to heighten refinancing risk further. The current Ba3 rating incorporates Moody's expectation that the rand RCF will be refinanced well ahead of maturity while recognizing that Sibanye-Stillwater can access alternative sources of liquidity by entering into streaming or prepayment agreements.

RATING OUTLOOK

The negative rating outlook reflects the challenging operating environment that Sibanye-Stillwater faces in its South Africa operations that could lead to further weakness in credit metrics and operating cash flows, particularly in the context of volatile commodity prices and USD/rand FX rates.

WHAT COULD CHANGE THE RATING UP/DOWN

Sibanye-Stillwater is unlikely to be upgraded in the near-term. A structural improvement in the operating risk profile of the company's South Africa operations would be supportive of upward ratings pressure along with a healthy liquidity position and improvement in its leverage profile, such that debt/EBITDA trends towards 2.75x and (CFO-dividends)/debt is maintained above 30%.

Downward pressure on the ratings could emerge if: (1) debt/EBITDA is sustained above 3.5x; (2) (CFO-dividends)/debt does not show an improving trend such that it exceeds 20% over the next 12-18 months; (3) Sibanye-Stillwater's liquidity position weakens further; or (4) there is an increase in the company's operating risk profile. A lack of progress on either strikes or liquidity over the coming months may lead to a further downgrade.

LIST OF AFFECTED RATINGS:

Downgrades:

..Issuer: Sibanye Gold Limited

.... Corporate Family Rating, Downgraded to Ba3 from Ba2

.... Probability of Default Rating, Downgraded to Ba3-PD from Ba2-PD

..Issuer: Stillwater Mining Company

....BACKED Senior Unsecured Regular Bond/Debenture, Downgraded to Ba3 from Ba2

Outlook Actions:

..Issuer: Sibanye Gold Limited

....Outlook, Changed To Negative From Stable

..Issuer: Stillwater Mining Company

....Outlook, Changed To Negative From Stable

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Mining published in September 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in South Africa, Sibanye-Stillwater is an independent mining group primarily producing gold in South Africa and PGM in South Africa and the US. Sibanye-Stillwater is listed on the Johannesburg Stock Exchange, with a secondary listing on the New York Stock exchange. As of 30 June 2018 (LTM), Sibanye-Stillwater reported revenues of ZAR50.6 billion ($3.9 billion) and a Moody's-adjusted EBITDA of ZAR9 billion ($700 million).

The Local Market analyst for these ratings is Rehan Akbar, +971 (423) 795-65.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Sven Reinke
Senior Vice President
Corporate Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Mario Santangelo
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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