Sibanye-Stillwater acknowledges dumping Brazil deals could “constrain” its growth plans

SIBANYE-Stillwater acknowledged that the withdrawal from the $1bn purchase of two base metal mines in Brazil could negatively affect its commodity diversification strategy.

“It could constrain us because it is becoming more competitive so it might be harder (to bid for assets on value),” said James Wellsted, head of investor relations for Sibanye-Stillwater.

“But the strategy will continue.”

Prior to bidding for the mines, Sibanye-Stillwater had committed $1bn to investments in lithium and nickel in Europe and the US. This was in order to diversify its revenue stream from precious metals production in South Africa.

Wellsted dismissed some of the theories in the market, however, that Sibanye-Stillwater might divert the $1bn meant for its Brazil investments immediately into dividends, or that the company could revisit its gold expansion ambitions.

“On the gold side, we don’t see any value. Why would we buy anything now?,” said Wellsted. Shares in Gold Fields, one of the companies with which Sibanye-Stillwater was connected about a year ago, is 12% higher whereas Sibanye-Stillwater is 8% lower. However, shares in Sibanye-Stillwater have outperformed AngloGold Ashanti.

The platinum group metal and gold producer surprised the market on Monday saying that it was not proceeding with the purchase of Atlantic Nickel and MVV, companies housing the Santa Rita nickel mine and Serrote copper project respectively.

This followed a “geotechnical event” at the Santa Rita mine believed to be the collapse of a pit wall. The seller, private equity firm Appian Capital Advisory, said it would review its legal options especially as the event only applied to a small portion of the mine.

It added that Santa Rita was “expected to have strong operational and financial performance in 2022 and generate significant free cash flow”. The mine had first quartile costs owing to a reconfiguration of mining innovated by Appian – a company that is staffed with former mining company CEOs.

“Appian is currently assessing all of its legal options and will take all necessary action to enforce its legal rights,” it said. Miningmx has asked Appian for details of legal options at its disposal.

Wellsted said that conditions precedent on the transaction – first unveiled in October – had not been fulfilled of Sibanye-Stillwater and that it had notified Appian Capital of its decision not to proceed. The parties had not agreed to a break-free mechanism.

“Appian is saying that the additional waste that would have to be mined as a result of the wall collapse was only 1% of the mine’s volume over its forecast 34 year life. But that’s including the underground mine over which only a scoping study has been done,” he said.

According to Sibanye-Stillwater, its investment in Santa Rita was primarily for the six to seven-year life open pit. This was built into the transaction – according to Wellsted – as the company had only agreed to pay a net smelter royalty on proceeds of underground mining.

As Atlantic Nickel and MMV were seen as a single transaction, Sibanye-Stillwater said it was withdrawing from both.