Sibanye Gold and Anglo American Platinum (Amplats) announced on September 9 an agreement whereby Sibanye will acquire Amplats’ Rustenburg mining operations and certain other assets (the Rustenburg Operations) on the Western Limb of South Africa’s Bushveld Complex. Included in the transaction are the underground Bathopele, Siphumelele, and Thembelani platinum group metals (PGM) mines, two concentrating plants, an on-site chrome recovery plant, the Western Limb tailings retreatment plant, associated surface infrastructure, and related assets and liabilities. The acquisition is on a going-concern basis, including normalized levels of working capital.
Amplats will retain its Rustenburg refining and smelting operations. For the period from closing of the transaction to December 31, 2018, Sibanye will sell all concentrate produced by the Rustenburg Operations to Amplats on pre-agreed terms. For a further eight years, Amplats will undertake the smelting and refining of concentrate production from the Rustenburg Operations on a toll treatment basis, and Sibanye will take possession of the metals produced for its own marketing purposes.
Should the Rustenburg Operations generate negative free cash flows over the near term, Amplats will provide up to R267 million per year to support the operations up to the end of 2018.
Sibanye will include a consortium of Broad Based Black Economic Empowerment (BBBEE) stakeholders in the transaction such that at closing Sibanye will own 74% of the Rustenburg Operations and the BBBEE stakeholders will own 26%.
Production from the Rustenburg Operations is forecast at 800,000 oz/y of 4E PGM (platinum, palladium, rhodium, and gold), including 500,000 oz/y of platinum, over the next five years. As of year-end 2014, Rustenburg Operations’ 4E PGM reserves were estimated at 9.7 million oz, and its 4E PGM resources were estimated at 88.8 million oz. The Rustenburg mines operate under a mining right covering 152 km2, with a strike length of 28 km.
Sibanye’s purchase consideration includes an upfront payment of R1.5 billion (about $111 million) at closing and a deferred payment calculated as being equal to 35% of the distributable free cash flow generated by the Rustenburg Operations over a six-year period from the later of closing or January 1, 2017, subject to a minimum payment of R3 billion. The transaction requires a number of shareholder, lender, government, regulatory, and stock exchange approvals and may require as much as 12 months to complete.
Sibanye is an independent, South African-domiciled mining group that currently owns and operates four underground and surface gold operations: the Cooke, Driefontein, and Kloof operations in the West Witwatersrand region and the Beatrix operation in the southern Free State province.
Sibanye CEO Neal Froneman said, “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. The Rustenburg Operations are similar in nature to Sibanye’s current gold operations and, after extensive engagement with Anglo American Platinum 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 are well positioned as a platform to grow regionally within the PGM sector and benefit from a recovery in PGM market conditions. The outcome is a sensible commercial transaction, which is strategically advantageous for both parties.”