Sibanye-Stillwater takes up bargain R1bn option to lift stake in DRDGold to 50.1%

SIBANYE-Stillwater has extended its stake in DRDGold to 50.1% in terms of an option agreement signed in 2017.

The precious metals producer bought a 38.5% stake in DRDGold in return for surface dumps attached to its West Rand mines, Libanon and Driefontein. As part of the deal, Sibanye-Stillwater had 24 months to take up control of DRDGold.

Exercise of the option represents excellent business for Sibanye-Stillwater because it was struck at R6.46 per share. Since then shares in DRDGold have rocketed and are currently valued at R7.69/share.

“We are thrilled that the value of our initial shareholding has already increased by 147% over 17 months,” said Neal Froneman, CEO of Sibanye-Stillwater.

Sibanye-Stillwater will subscribe for 168.2 million new ordinary shares at an aggregate subscription price of just over R1bn on 22 January 2020.

“This latest transaction marks the single largest investment that has ever been made by an individual shareholder in the capital of our company, and it bears testimony to a shared vision for the future of our enterprise,” said Niël Pretorius, CEO of DRDGold. “It will come in very handy in accelerating the further unlocking of value in DRDGOLD’s business and will go a long way to fund the early-stage development of FWGR Phase 2.”

DRDGold has ploughed R330.7m in a phase one development of FWGR (Far West Gold Recoveries as DRDGold renamed the Sibanye surface assets) producing just over 20,000 ounces of gold in the period, including gold produced from FWGR before it was declared commercial on April 1.

DRDGold said it had started Phase 2 of FWGR beginning with “conceptual studies” to evaluate options to treat the remaining reserves acquired from Sibanye-Stillwater.

One option is to construct a new re-treatment plant and tailings storage facility to exploit a larger, regional mineral resource, producing more gold over a longer period and rehabilitating a much larger footprint, the company said.

In a separate announcement today, DRDGOLD said it produced more than three tons of gold, equal to 3,037kg, from its two operations (Ergo and FWGR) for the six months ended December 31.

This tracks the higher end of the company’s production guidance of 190,000 ounces for the year ending June 30 and is a 33% increase on the 2,280kg produced for the six months ended December 31, the company said. “The increase is mainly as a result of the increased contribution by FWGR,” said DRDGold.

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