Subsidiary of JSE- and NYSE-listed Sibanye-Stillwater – Sibanye Rustenburg Platinum Mines (Rustenburg operation) – has entered into an agreement with Anglo American Platinum (Amplats) subsidiary – Rustenburg Platinum Mines (RPM) – in which the Rustenburg operation will assume full ownership of the low-cost, mechanised Kroondal operation.

This transaction, although valued at R1, also comes with ownership of the Marikana pool-and-share agreement (PSA) and any associated mine closure and rehabilitation liabilities and costs for Kroondal. These costs are currently estimated to be about R415-million.

The transaction facilitates a life-of-mine extension for the Kroondal operation to 2029.

Sibanye CEO Neal Froneman says the agreement will accelerate the extraction of more remote parts of the Rustenburg operation’s orebody, sustain employment for more than 2 500 people until 2029 and ensure the creation of significant value for all stakeholders in the region.

The Kroondal operation is subject to a 50:50 PSA between Kroondal Operations (a 100%-held subsidiary of Sibanye) and RPM, the latter acquiring its interest in the Kroondal PSA following its acquisition of Aquarius Platinum in 2016.

Sibanye currently operates the Kroondal operation, which is located adjacent to, and up-dip of Sibanye’s Rustenburg operation and the shallow Klipfontein openpit operation.

By the end of 2020, certain shafts at the Kroondal operation had reached the boundaries of the Kroondal PSA lease area. To enable the affected shafts to continue operating, with effect from January, a contractor mining agreement was agreed between the PSA parties and the Rustenburg operation, providing for the mining of the Rustenburg operation using Kroondal’s infrastructure – otherwise known as the contractor agreement.

As a result, Amplats will generate cash flows from its 50% share of Kroondal’s 1.35-million ounces earlier (by the end of 2023), at a lower cost of production (after enhancing the mine plan to extract the resource from both the Kroondal and Rustenburg mining right areas) and under the pre-­existing Kroondal purchase of concentrate terms.

Thereafter, Amplats will exit its interest in the PSAs, transferring all assets and liabilities to Sibanye, with no outstanding economic interest in the Kroondal mining operation.

Going forward, Amplats will continue to process the concentrate produced from the Kroondal concentrators until 2026 under the toll-and-­purchase agreement with Sibanye, which was concluded as part of the Rustenburg disposal transaction of 2016.

The latest agreement permits immediate exploitation of parts of the Rustenburg operation’s orebody, which would otherwise only have been mined from the existing Rustenburg operation’s infrastructure sometime in the future. Therefore, the agreement facilitates the early conversion of a portion of the Rustenburg operation’s mineral resources into reserves and extending the life of the Kroondal operation.

The implementation of the transaction is subject to fulfilling three key conditions precedent, including delivering 1.35-million ounces of platinum, palladium, rhodium and gold (4E) by the Kroondal operation to RPM’s designated smelters through the mining of both the Kroondal PSA orebody and the Rustenburg operation’s orebody, as well as the Klipfontein openpit operation.

The 1.35-million ounces of 4E will be delivered in accordance with the terms of the current Kroondal PSA and the current Kroondal purchase of concentrate (PoC) agreement with RPM. This condition precedent is expected to be fulfilled early in 2024.

Thirdly, the transaction requires regulatory approvals, including Competition Commission approval and Section 11 consent in terms of the Mineral and Petroleum Resources Development Act for the transfer of the mining right, currently held by RPM, to Sibanye’s Rustenburg operation.

On completion of the transaction, the PSAs with Amplats will be terminated and Sibanye (through the Rustenburg operation), will be entitled to mine the remaining PSA orebody and ore from the Rustenburg operation that may be accessed from the Kroondal operation infrastructure entirely for Sibanye’s account.

The PoC agreement will also fall away on completion of the transaction, with all platinum group metals concentrate from the combined operations being subject to the terms of the current Rustenburg operation’s sale and toll treatment agreement with RPM.

These agreements will more than double the life of the Kroondal operation, underpinning much needed sustained employment opportunities, and ensuring significant value creation for all stakeholders through the lower cost and more efficient extraction of the project area orebody than would have been the case as two standalone operations.