Sibanye trades assets for stake in DRDGold
The unfettered growth ambitions of Sibanye-Stillwater were further in evidence on Wednesday, when the gold and platinum group metals miner vended assets into DRDGold in exchange for a 38% stake in the tailings retreatment specialist worth R1.3bn.
Sibanye put its vast West Rand tailings retreatment project on the backburner earlier in 2017, citing uncertainty about the unsettled and hostile regulatory environment and possible sovereign ratings downgrades, making cost and revenue forecasts near impossible.
This meant the board and shareholders would never consent to it spending about R4bn on a big-bang approach on the project rather than the conservative and phased approach DRDGold will take.
Most of the gold assets in the tailings retreatment project form part of the DRDGold transaction, which will entail building a large processing plant to handle a million tonnes a month and a tailings storage facility, which could act as a magnet to consolidate more dumps west of Johannesburg.
The assets included a range of gold-bearing dumps near Carletonville west of Johannesburg, as well as three processing plants, transforming DRDGold at a stroke and giving it a platform from which to grow aggressively into Africa and other commodities, said Sibanye CE Neal Froneman and, more circumspectly, DRDGold CE Niel Pretorius.
Pretorius has the shorter-term goals of first clearing the hurdle of securing a waiver from DRDGold shareholders for Sibanye to make an offer for the entire company or have the deal terminated, then he wants to bring high-grade tailings dumps into production as quickly as possible for about R200m.
This will generate cash to launch the second transforming phase to build the million tonnes a month plant and the construction of the large tailings storage facility for about R2bn.
If done properly, the tailings retreatment project could deliver 43 tonnes of gold over the next 15 to 20 years, adding to the 40 tonnes that would come from the Ergo plant near Brakpan over the same time frame, Pretorius said.
The talk of expansion into other commodities and outside SA came from Froneman.
Pretorius said in an interview that the DRDGold board had discussed entries into platinum tailings. It simply did not have the size or market presence to further such a strategy and instead focused on Ergo.
Froneman is clear that the deal with DRDGold is just the first step in Sibanye’s plans for the tailings retreatment specialist, with large platinum and chrome tailings on its Rustenburg mines, as well as companies bringing proposals to it for sale or partnership, often too small for Sibanye to take on itself but perfect for DRDGold, in which Sibanye has the option to increase its stake to 50% plus one stake for cash within 24 months.
While Sibanye’s balance sheet is groaning after the $2.2bn purchase of US palladium and platinum miner Stillwater, Froneman and his team have committed to restoring it to health within two years.