Sibanye-Stillwater to assume full ownership of Kroondal

…we’re now able to mine into the Rustenburg reserves from the Kroondal operations, which will accelerate value for Amplats and ourselves; it also doubles Aquarius’s [operating] life: James Wellsted of Sibanye Stillwater.

FIFI PETERS: What do you think you can get for R1 nowadays? Who says that R1 nowadays can’t go very far? I say this in the context of the transaction that was announced from the mining complex today, in which Sibanye-Stillwater announced that it would be acquiring the 50% Anglo Platinum stake in the Kroondal platinum mine near Rustenburg for R1. This will give Sibanye-Stillwater full control of the mine in which it bought a 50% stake back in 2016 from Aquarius Platinum.

But of course this R1 also accounts for all the other costs that Sibanye will be assuming to take the mine over in full ownership – the liabilities that do exist, as well as the rehabilitation costs of the mine which come to around R415 million.

But let’s get to James Wellsted, the senior vice-president for investor relations at Sibanye to tell us more. James, thanks so much for your time. We were all taken [aback] by that R1 price tag – but of course it’s R1 and a whole lot more. This deal’s a little more complex. Just tell us how long it has been in the pipeline.

JAMES WELLSTED: Good evening, Fifi. Yes, it’s actually been in the pipeline for quite a while, as you said. We acquired the Kroondal operations when we bought Aquarius in 2016 and, shortly after that, we acquired the Rustenburg operations which are adjacent to the Kroondal mine from Anglo Platinum in 2016 as well, and realised a lot of value from that transaction.

However, at the time Anglo Platinum retained its 50% interest in the Kroondal joint venture, which meant that essentially prior to acquiring these assets Aquarius and Anglo had entered into agreements whereby Aquarius used the infrastructure of the mine – the low-cost very mechanised mine – to essentially mine Anglo Platinum’s reserves at Rustenburg, and then they shared the profits. So one company was providing the infrastructure, the other the reserves, and both were benefiting.

Anglo had retained its 50% interest. It’s made a lot of sense for us to consolidate the entire ownership of that asset and it allows for a lot of synergies to be realised between Rustenburg and Aquarius. That’s exactly what this deal is.

Effectively Kroondal, because it had unlimited area it could mine, would’ve been going into a declining production profile from now until 2025, when effectively it would’ve reached the end of its life. Through this agreement we are now able to mine into the Rustenburg reserves from the Kroondal operations, which will accelerate value for both Anglo Platinum and ourselves; it also doubles the (operating) life of Aquarius, which will bring a lot of benefits to all stakeholders in the area. It creates employment for longer, enabling us to do more community development and so on.

So it’s really a win-win, and it’s one of those logical deals that people in the market have been talking about for many years – of getting rid of the mine boundaries and really mining these ore bodies, as they should, as contiguous and continuous ore bodies.

FIFI PETERS: Any conditions you have to meet before this goes over the line?

JAMES WELLSTED: No, we’ve effectively agreed. We are already mining into the Rustenberg reserves from the Kroondal mine. That’s already taking place. Once we’ve delivered effectively 1.35 million ounces of PGMs to Anglo’s processing [facility] in terms of our current agreement, we will take full ownership. Until that point Anglo will still benefit from 50% of the profits that come from this mine, but thereafter we’ll own 100%. So it’s a real value-accretive transaction for all sides.

FIFI PETERS: All right. James, this announcement comes hot on the heels of the announcement last week regarding the company’s plans to no longer pursue the copper and the nickel mine it was trying to buy out there in Brazil. Are you at liberty to tell us at this stage what next?

Read: Sibanye move to ditch $1bn deal is disputed by seller
Listen/read: Sibanye pulls out of R15bn Brazilian mines deal

JAMES WELLSTED: Well, the transaction with Appian (Appian Capital Advisory LLP), which was where we proposed to acquire the Santa Rita nickel mine and Serrote copper mine in Brazil, effectively was one of the steps in our battery-metal strategy, or green-metal strategy, where we’d been looking at that battery-metal market, that lithium, manganese, copper, nickel, cobalt and so forth, for some time.

We’ve already expanded in PGMs from being a South African gold company. We are now one of the largest global PGM producers in the world. We could see the strategic logic of expanding into the green-metal space. So we have been looking at that market for two to three years, and last year we announced five transactions in that space, including the Appian transaction.

Unfortunately towards the end of last year, there was a geotechnical event at the mine that we were looking to buy, which has affected the value of that operation. As a result we’ve walked away from that transaction. But it doesn’t change our strategy. We have other targets that we are looking at. We have been engaging with other companies and we hope to still be able to execute further on that strategy.

FIFI PETERS: All right. Just in passing, it has been some time since the CCMA awarded your workers wishing to embark on strike action at the mine a certificate of approval. Is there anything you can tell us about that action at this stage?

JAMES WELLSTED: Essentially we’ve been in negotiations about wages with the unions at our gold operations since June last year. We haven’t been able to reach an agreement with the unions. We then continued to engage under the auspices of the CCMA, and ultimately we’re still unable to reach agreement. So they’ve issued a certificate of non-resolution, which allows the unions to strike and for us to lock out workers with 48 hours’ notice. But we are still continuing to engage. We’ll have further engagements this week and we are still quite hopeful of finding a reasonable outcome that suits both sides.

FIFI PETERS:  All right. We’ll be keeping our eyes closely on the headlines that emerge from those engagements this week. James, thanks so much for your time, as always. James Wellsted, the senior vice-president for investor relations at Sibanye.



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