SIBANYE-Stillwater has delayed the approval of its 120,000 ounce a year Mpumalanga gold project Burnstone citing the board’s capital approval process.
While there are no technical or strategic problems with the project – which is expected to absorb R2.7bn in pre-production capital – uncertainty over its mining licence regulations is a concern, said Richard Stewart, CEO of Sibanye-Stillwater.
“Burnstone will require renewal,” said Stewart at Sibanye-Stillwater’s capital markets presentation in Johannesburg today. “There are a lot of rumours around what might come out in terms of renewals of new mining licences.
“Historically, Burnstone has been an empowered asset. So in terms of the numbers and the valuations that is the way we continue to look at it,” he said.
The South African government gazetted the Minerals and Petroleum Resources Development Bill in May last year which seeks to amend the MPRDA of 2002 in certain key respects. Critically, the Bill does not contain express transitional provisions recognising previous empowerment transactions for purposes of empowerment compliance.
Stewart said that Burnstone had “a long build time” so commiting to its development over five to six years required regulatory uncertainty.
“I think this is a good example of something which has got to go to our board … and an uncertainty like what’s going to happen with mining regulations does come into discussions,” he said.
“When we’re asked about examples of where regulatory certainty matters, in terms of driving growth in South Africa, here’s a project that’s going to employ 3,000 people for 20 years. That the kind of uncertainty doesn’t help a conversation around this kind of commitment,” he added.
Sibanye-Stillwater is hoping to restart Burnstone’s plant in 2029. Based on the recently completed feasibility study, it will operate at an average all-in sustaining cost of R872,000 per kilogram at steady state returning an net present value of R19bn assuming a 10% discount rate, and an internal rate of return of 36%.
Stewart was asked during the capital markets presentation if the project comprised the best use of Sibanye-Stillwater’s capital as it was ploughing billions of rands into so-called ‘legacy assets’ in its platinum group metals portfolio. He replied: “Gold is still a commodity we would like within the portfolio. For various reasons, we understand it, we think it’s a good commodity, and if you’re in a business that’s very industrial-focused, it does create a bit of a hedge against big global upturns and downturns.”
“Where else in the world are you going to find a gold project today that can produce 125,000 ounces at sub-$2,000 an ounce at a capital number of a couple of hundred million dollars? That is an unbelievably rare prospect for that kind of value.”
