Sibanye CEO Neal Froneman
Photo by: Duane Daws
JOHANNESBURG (miningweekly.com) – South African platinum-mining company Anglo American Platinum (Amplats) said on Wednesday that it would be selling its Rustenburg Platinum mining and concentrating operations to Sibanye Gold for at least R4.5-billion.
The Rustenburg Operations consist of the Bathopele, Siphumelele and Thembelani mining operations, which include the integrated Khuseleka and Khomanani mining operations, two concentrating plants, an on-site chrome recovery plant, the Western Limb Tailings Retreatment plant and associated surface infrastructure and related assets and liabilities.
Sibanye, headed by CEO Neal Froneman, would make an upfront cash or shares payment of R1.5-billion and deferred consideration calculated as being equal to 35% of the distributable free cash flow generated by the Rustenburg Operations over a defined period with a minimum amount of R3-billion payable.
No job losses are expected, a broad-based black economic-empowerment transaction is being arranged and the deal is structured in a way that protects Sibanye from downside risk and allows both companies to benefit from upside potential.
Amplats will not be a long-term holder of the Sibanye shares and has undertaken to exit in a responsible manner.
Amplats will smelt for Sibanye first at a special price and eventually as part of a toll arrangement.
During 2012, Amplats embarked on a portfolio review in response to the structural changes taking place in the platinum industry.
The outcome of the review was to restructure the business to remove lossmaking ounces and align production with market demand.
This resulted in the consolidation of Rustenburg from five to three mines and Union from two to one mine, removing 350 000 oz of unprofitable platinum production.
The Union mine is still for sale.
A further cost and capital prioritisation programme was implemented that resulted in revised operational mine plans, cost savings and revenue enhancements with a total benefit of R4.2-billion.
In 2014 the company announced the repositioning of its portfolio to focus on low-cost production through shifting towards mechanised operations.
Given the number of operations within its portfolio, Amplats said that it believes that certain operations would receive greater management focus under different ownership where the mines will not be competing for allocation of capital.
Amplats, accordingly, announced its intention to exit from certain noncore operations, including the Rustenburg Operations.
“We are pleased to announce a significant milestone in the repositioning of our portfolio with the disposal of the Rustenburg Operations to Sibanye,” said Amplats CEO Chris Griffith, who described the Rustenburg Operations as quality assets with long-term and sustainable potential under Sibanye’s control, given Sibanye’s proven and successful track record of operating conventional mines in South Africa.
Amplats’ focus from the outset had been to identify the right option for the business, its stakeholders and shareholders and it believed it had concluded a beneficial transaction for both parties, while also securing a sustainable future for the Rustenburg Operations.
It remained committed to reposition Amplats as a high quality, largely mechanised operator yielding high margins.
“We are focusing on our core assets and exiting those assets we have identified as noncore in a responsible manner, consistent with the objectives of the Mining Charter,” Griffith added in a media release sent to Creamer Media’s Mining Weekly Online.
If the distributable free cash flow generated by the Rustenburg Operations is negative in 2016, 2017 or 2018, there will be a downwards adjustment to the total consideration received by an amount such that the distributable free cash flow for the relevant year is equal to zero, but such payments by Amplats shall not exceed R800-million.
Sibanye will enter into a toll treatment arrangement whereby Amplats will undertake the smelting and refining activities on pre-agreed commercial terms.
The charge payable by Sibanye under the toll treatment arrangement will reflect smelting and refining costs as well as an economic return on the proportional share of the current capital base Amplats has invested in its processing assets.