Sibanye strikes processing deal with Amplats after shutdown
Biggest source of PGMs will be able to refine material from its Marikana facility
Sibanye-Stillwater, the world biggest source of platinum group metals (PGMs), will use spare smelting capacity to ease the effect of an 80-day shutdown of a processing facility at rival Anglo American Platinum (Amplats) after the parties reached an agreement in principle.
Earlier in March, Amplats issued a force-majeure notice — a legal defence that allows it to avoid liability for failing to meet contractual obligations due to an unexpected event — on supplies of metals after an explosion at a Rustenburg processing plant.
The agreement would enable Sibanye, one of the companies issued with a force-majeure notification, to refine PGM-containing material from its own Marikana facility instead of sending it to Amplats for processing, Sibanye said on Tuesday.
At close of trade on Tuesday, Sibanye's share price was 5.4% higher at R22.29 while Amplats was down 6.17% and Impala Platinum was down 4.92%.
The agreement minimises supply disruptions at Sibanye, but comes while PGM prices have suffered sharp losses in the wake of a global sell-off of industrial metals due to worries about the effects of the coronavirus pandemic on vehicle production and the global economy.
“We welcome the finalisation of these arrangements with Anglo Platinum, which will largely offset the impact of the force-majeure event on the Sibanye-Stillwater operations and result in a minimal impact on the production outlook for the SA PGM operations,” said Sibanye CEO Neal Froneman.
Under the agreement, Sibanye will process all PGM materials produced from its Rustenburg and Platinum Mile operations.
Sibanye will also be processing half of PGM-containing material produced from Kroondal operations, a 50-50 joint venture with Amplats.
The agreement will remain in place for at least the duration of the force majeure, which carries with it reputational damage and is not something companies declare lightly.
Before the force majeure, PGM-containing material from Rustenburg was smelted and refined by Amplats under an agreement struck in 2016 when Sibanye bought the assets while material from Kroondal was subject to an agreement under which Amplats was responsible for smelting the output.
Amplats, the world’s second-biggest source of PGMs, declared force majeure on supplies of metals to customers on March 6, and warned that the shutdown will lead to 900,000 ounces in lost annual output.
After an explosion on February 10 at its Anglo converter plant, which treats smelted matte in preparation for putting it through a host of refining processes, Amplats started its second converter plant. However, the second plant had inexplicable water ingress, a dangerous situation when working with metals at very high temperatures, and posed a risk of another explosion.
The first plant is expected to return to service by the second quarter of 2021.
• With Allan Seccombe