Sibanye-Stillwater’s R14.85bn cash offer for Brazilian mining assets

‘If you look at our Ebitda contribution probably 60, 70% is already from SA. In terms of getting a better credit rating and looking at our overall risk profile … we would be diversifying out of South Africa’– group CFO Charl Keyter.

FIFI PETERS: Talking about the future and metals of the future, Sibanye-Stillwater is investing very heavily in its green-metal portfolio, and is in the process of planning to add a further two mines in that part of the business. Late yesterday it announced a deal to buy a nickel and a copper mine in Brazil for $1 billion; that translates to about R15 billion if we round it off.

Charl Keyter, the group CFO at Sibanye-Stillwater, joins the Market Update for the detail. Charl, thanks so much for your time. Tell us how you stumbled upon these assets.

CHARL KEYTER: Good evening and thank you for the opportunity. It’s not a question of necessary ‘stumbling’ across these assets. As a company we acquired a research house known as SFA (Oxford) about two years ago when we realised that the battery-metal space, or the green-energy metal space, is an area where we would like to further advance our strategy. They’ve done research for us over the last two years on what those metals of the future will be. Based on that, it’s a two-year process. We looked at potential targets and that’s how we ultimately ended up by narrowing it down and getting to these two.

FIFI PETERS: Just paint a picture of the two latest additions to the portfolio that you’re bringing in. Exactly how much do they make, and what do the numbers look like in terms of revenue and profit?

CHARL KEYTER: I’d say in terms of the two mines – the Santo Rica nickel mine and the Serrote copper mine, both based in Brazil – if you look at the Santo Rica mine, we started operations in 2019. It ramped up through 2019 and 2020, and it had five shipments of concentrate in the first half of 2121. It’s currently estimating to generate Ebitda [earnings before interest, tax, depreciation and amortisation] of $53 million for 2021, but that’s obviously going to build up as the mine starts ramping up.

If you look at revenue and cost, if you just look at the revenue line in terms of nickel, nickel is trading at about $9/pound. We estimate this asset to produce at an all-in sustaining cost of about $3.50/pound.

Moving on to the Serrote copper mine, the construction is complete. It was completed on May 31 and it’s starting to build up. So it’s a fully capitalised mine, and we expect the first concentrate in Quarter 4, 2021.

Again, looking at copper, copper is trading at about $4.50/pound. We expect this mine to produce an all-in sustaining cost of about a $1.50/pound. So again, a very, very nice asset.

FIFI PETERS: With the total price tag for both these mines at $1 billion, will you need to put any additional money into these mines – and how much?

CHARL KEYTER: No. Both these mines are capitalised. In terms of moving forward, it’ll just be sustaining capital expenditure.

FIFI PETERS: And how soon do these millions translate or come back into the pockets of your shareholders?

CHARL KEYTER: If you look at the purchase consideration and probably looking at Ebitda, it’s probably a five-times Ebitda purchase consideration. But looking at the commodity prices and the all-in sustaining costs, these will start generating cash from day one, and that will translate into a dividend to our shareholders.

FIFI PETERS: All right. You’re buying a whole lot of assets to add into the green-metal portfolio, but it’s all happening outside of South Africa. Is that intentional?

CHARL KEYTER: Some of it is intentional if we look at lithium. South Africa is not a big producer of lithium, but if you look at the electric drivetrain of the vehicle, lithium plays a big part specifically in that area. So some of it is just because there aren’t those metals or minerals in South Africa. But it is definitely a strategy of the company to geographically diversify. If you look at our Ebitda contribution, I would say probably 60, 70% is already from South Africa. So, in terms of getting a better credit rating and looking at our overall risk profile, that is partly the reason why we would be diversifying specifically out of South Africa.

FIFI PETERS: What about the rest of the continent? I believe that Zimbabwe and the DRC are among the top 10 countries in the world for lithium reserves. Are you seeing any opportunities, or is the plan to look outside of South Africa into the rest of the continent?

CHARL KEYTER: I would say that the continent is off limits. For us to really get an improved rating we have to target stable non-jurisdictions. Zimbabwe and the DRC are not necessarily favoured destinations. Like I say, not off limits, but things will have to substantially improve for us to consider investing into the continent.

FIFI PETERS: All right, Charl. Thanks so much for your time, sir. We will leave it there. That was Charl Keyter, group CFO at Sibanye-Stillwater. Sibanye-Stillwater’s share price finished up slightly higher today – a bit of a rebound that we saw in the session following the pressure yesterday owing to pressure on the commodities complex. Nonetheless it looks like a bit of a thumbs-up from shareholders on the latest deal.

Sibanye-Stillwater share price



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I need special permission to send a few Ront out of the country….?

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