Sibanye Gold plans to acquire the Rustenburg Operations from Anglo American Platinum (Amplats) for an upfront consideration of R1.5 billion ($124 million) in cash or shares and a deferred consideration equal to 35% of the distributable free cash flows generated by the Rustenburg Operations over a six-year period, subject to a minimum nominal payment of R3 billion ($248 million).
“We have for some time indicated our interest in participating in the PGM sector and believe that these assets provide an attractively priced entry at an advantageous moment in the price cycle,” said Neal Froneman, CEO of Sibanye. “The Rustenburg Operations are similar in nature to Sibanye’s current gold operations and, after extensive engagement with Amplats and completing a thorough due diligence, we are confident that we will be able to realize value for our stakeholders by leveraging our successful operating model. The Rustenburg Operations have been significantly restructured and are well positioned to benefit from a recovery in PGM market conditions and provide a platform to grow regionally within the PGM sector.”
Sibanye said it will be including a consortium of Broad Based Black Economic Empowerment (BBBEE) stakeholders such that, at the closing of the transaction, Sibanye will own 74% of the Rustenburg Operations, with the BBBEE stakeholders owning 26%.
The Rustenburg Operations are located centrally on the Western Limb of the Bushveld Complex, near the town of Rustenburg and consist of the Bathopele, Siphumelele, and Thembelani mining operations, two concentrating plants, an on-site chrome recovery plant, the western limb tailings retreatment plant and associated surface infrastructure, as well as approximately 4 months of working capital on a going concern basis. The lease area covers an extensive 28 km strike length with the ore body extending 8 km down dip.
Current PGM (4E) mineral reserves amount to approximately 9.7 million oz and mineral resources are estimated at 88.8 million oz. With annual production of more than 800,000 oz, the Rustenburg Operations are placed firmly as the fifth-largest PGM producer globally. Amplats recently rationalized and restructured the operations, eliminating loss-making production and reducing the workforce by approximately 7,500 people. Operational optimization will continue under Amplats until the transaction is completed, but in H1 2015, the Rustenburg Operations generated approximately R261 million ($22 million), despite prevailing low PGM prices.
“The Rustenburg Operations are quality assets with long-term and sustainable potential under Sibanye’s control, given their proven and successful track record of operating conventional mines in South Africa,” said Chris Griffith, CEO of Anglo American Platinum. “We remain committed to pursuing our strategy, continuing to reposition Anglo American Platinum as a high-quality, largely mechanized operator yielding high margins.”