Sibanye-Stillwater makes surprise R1.3bn move on DRDGold
The gold and platinum miner is still chewing on the Stillwater acquisition
Gold and platinum group metals miner Sibanye-Stillwater will take a 38% stake in DRDGold worth R1.3bn, by vending a number of its surface assets into the tailings retreatment specialist.
It could take a controlling stake within two years.
Sibanye, the largest producer of South African gold and a major platinum group metals producer, had put it West Rand Tailing Retreatment Project (WRTRP) on the backburner.
It cited an uncertain mining environment and uncertain returns for the project but some analysts said the company had overextended its finances by buying America’s Stillwater for $2.2bn cash and placing a large debt burden on itself.
One of the options was to bring in DRDGold, which was openly hunting fresh tailings for its enormous ERGO plant near Brakpan east of Johannesburg.
Sibanye said on Wednesday the transaction with DRDGold would create an immediate R1.3bn worth of value for the assets it was vending into the company and keep its exposure to the WRTRP.
"We are excited about the inherent potential in the investment and look forward to partnering with DRDGold in growing an international, industry-leading, surface retreatment business," Sibanye CEO Neal Froneman said.
"Sibanye-Stillwater will realise immediate value for underutilised surface infrastructure and tailings storage facilities, while retaining upside to the West Rand Tailings Retreatment Project and future growth in DRDGold," he said.
The WRTRP assets include gold dumps from Kloof and Driefontein as well as the Cooke dumps that came with Sibanye's purchase of the Cooke Mines from Gold One. There are uranium-rich tailings which don’t form part of the initial transaction. Sibanye is keeping those dumps as well as the facilities at Cooke 4 shaft and plant to process uranium.
DRDGold will build a central processing plant as well as a regional tailings storage facility as part of plans to treat the dumps held at the Kloof and Driefontein mines near Carletonville as well as others in the area.
The transaction includes three processing plants, two at Driefontein and one at Cooke.
The dumps contain 3.8-million ounces of gold and 43-million pounds of uranium.
DRDGold will tackle the new assets in two phases, upgrading the existing plants in a low-capital expenditure way and then revisit Sibanye’s plans around tackling the WRTRP dumps to refine the costing and engineering processes.
In the first phase, DRDGold will double capacity at the two Driefontein plants to process high-grade dumps and generate cash for low upfront expenditure.
"These cash flows will be prioritised for the development of subsequent phases," the company said.
The second phase of DRDGold’s plans entail the construction of a central processing plant capable of processing 1-million tonnes of material a month as well as building a new regional tailings storage facility and pipelines to transport material to and from the plant.
Sibanye has agreed with DRDGold the option to buy more shares at a 10% discount to the 30-day volume-weighted average price at any stage during a 24-month period to take ownership of the company to 50.1%.
The share prices of both companies jumped in early trade on the JSE. Sibanye was up 2.38% at R18.50 and DRDGold rose 2.82% to R5.10.