Sibanye-Stillwater to duke out $1.2bn Appian claim this week

NEAL Froneman, CEO of Sibanye-Stillwater is scheduled to testify on June 20 in the long-standing legal matter with Appian Capital Advisory.

Opening statements will be heard in the High Court in London on Thursday (13 June) after Appian lodged a $1.2bn compensation claim against on Sibanye-Stillwater in 2022. Any negative outcome for Sibanye-Stillwater, however may only fall due well into 2025.

Appian claimed the South Africans harmed its reputation when they cancelled the acquisitions of two base metal assets in South America: Atlantic Nickel and Mineração Vale Verde (MVV).

That was in October 2021. By January 2022, Sibanye-Stillwater pulled the plug on the two deals citing a “geotechnical event” at the Santa Rita nickel mine (held in Atlantic Nickel). As a material adverse effect (MAE) it was well within its contractual rights to cancel the deals, said Sibanye-Stillwater.

However, Appian will contend from tomorrow that Sibanye-Stillwater improperly relied on the MAE for commercial reasons unrelated to the event. Localised wall slippages in open pits are frequent scenarios, Appian may argue.

The backdrop to these developments may be a factor in the case.

Sibanye-Stillwater received a bit of flak when it first announced the two Appian deals with some analysts saying the group was over-extended. Prior the Atlantic Nickel and MMV deals, Sibanye-Stillwater had committed just shy of R10bn buying stakes or options in two lithium projects and a nickel processing plant.

“This should be a short-term positive for the stock, as many investors are not that comfortable with the company’s battery material strategy, in our view,” wrote Nedbank Securities analyst, Arnold van Graan at the time Sibanye-Stillwater called off the Appian deals.

Commenting today, James Wellsted, spokesman for Sibanye-Stillwater said the group’s position “hasn’t changed”. Froneman said in 2022 he was confident the firm was in its legal rights to pull the transaction. “We didn’t take the decision lightly,” he said. “We have substantial open cast expertise in the group which we brought in because of our move into these areas”.

At the time this was shaking out, Sibanye-Stillwater was in clover, reporting R24.8bn in headline earnings for the six months to June 30 2021. Two years later, profits have dried up amid a steep decline in platinum group metal (PGM) prices which – coupled with its project pipeline – has compressed the balance sheet.

Sibanye-Stillwater announced earlier this week agreements with a number of South African and international lenders to lift debt covenants for the next two years – a sign of the downside risk to the PGM market. It has cut hundreds of jobs as unprofitable production is halted.

Yet should Sibanye-Stillwater defeat Appian’s claim, it may prove to be a piece of nifty and fortuitous footwork. The nickel market has fallen under enormous price pressure amid over supply of low grade material from Indonesia. (Froneman once described Santa Rita in glowing terms as “one of the largest nickel-cobalt sulphide open pit mines in the world”.)

Full court proceedings are not expected to get underway until next week. Even if the judgement goes against Sibanye-Stillwater, the damages will not be tried until November 2025 by which time the group’s balance sheet will likely be restored.

Appian Capital agreed to sell Atlantic Nickel and MVV for just over $1bn in 2023 before the transaction was subsequently cancelled.