JOHANNESBURG (miningweekly.com) – Following years of negotiations, dual-listed Sibanye Gold and South Africa’s third-largest gold miner Harmony Gold have entered into an agreement for the exchange and sale of mining right portions of Sibanye’s Beatrix operations, in the southern Free State, and mining right portions of Harmony’s adjacent Joel operation.

According to the terms of the arrangement, Sibanye would exchange two mining right portions at its Beatrix operation, which were not included in its current life-of-mine (LoM) profile, for two mining right portions at Harmony’s Joel operation, which would be more readily accessible from the Beatrix North and South Sections.

The exchanged portions would be transferred between the parties for the same value, while the purchase consideration of a further two portions to be acquired by the Joel operation would be in the form of a royalty of 3% on gold revenue generated from these two portions.

The transaction was expected to create value for both companies by allowing the early and optimal extraction of resources currently not in their respective LoM plans.

By leveraging available capacity at existing and adjacent infrastructure, the cost of extracting these resources would be lower and the operating lives of the shafts would be extended, facilitating job creation in the region.

Commenting on the transaction, Harmony CEO Graham Briggs said the areas of Joel that the company would relinquish were difficult to access and had been deemed uneconomical, while the portions that the Joel operation would acquire were accessible and would increase the current LoM.

“We need to develop these portions into orebody status, so there’s still quite a lot of work to be done to see what gold is contained therein, but we believe the ounces of resources exchanged balance each other one-for-one,” he said during a conference call on Friday.

Sibanye CEO Neal Froneman added that the arrangement could set a precedent in an industry that would benefit from improved competitor collaboration.

“Much has been said in the past about the potential to unlock value in the South African gold industry by breaking down the farm fences, and I believe there remains significant potential to create meaningful value for shareholders through similar transactions in future,” he said.

The transaction remained subject to approval by the Department of Mineral Resources, which the parties expected to secure before the end of June next year.