Sibanye-Stillwater secures 30% stake in R6bn lithium project with Finland Govt.

SIBANYE-Stillwater took its first step towards diversification into industrial metal production with an agreement to invest €40m (R714m) in a lithium development firm that has the Finland government as its major shareholder.

The company, which produces gold and platinum group metals (PGMs), said today it would take a 30% stake in Keliber Oy which owns the Keliber mine in Finland’s Kaustinen region, considered rich in lithium reserves.

Lithium is used in the manufacture of some electric vehicle batteries. As a new age industrial metal, demand for the mineral has grown over the years. Whilst PGMs have major electric vehicle applications through fuel cells, the Keliber purchase signals Sibanye-Stillwater is making good on promises for aggressive diversification into the industrial market.

The Finnish Minerals Group, which manages Finnish State’s mining industry shareholdings, is the largest shareholder in Keliber, said Sibanye-Stillwater in an announcement.

The details of the investment are that Sibanye-Stillwater will take an initial beachhead 30% stake in the Keliber company for €30m, whilst it will also underwrite an offer Keliber is making to existing shareholders for shares in the company up to €10m in cash. As part of the investment agreement, Sibanye-Stillwater will have representation on Keliber’s board.

Sibanye-Stillwater will then participate in the development of the Keliber mine beginning with an updated definitive feasibility study over the next 18 to 24 months ahead of project financing estimated to be €340m or R6bn. The project financing would include both debt and an equity component, said Sibanye-Stillwater.

Crucially, in terms of Sibanye-Stillwater’s desire to participate meaningfully in the so-called battery metals market, the agreement with Keliber allows it a guaranteed option to take a majority shareholding in Keliber on the completion of the updated feasibility study. It would in such an outcome, contribute further equity financing for the development of the project.

Keliber is scoped to produce 15,000 tons annually of battery-grade lithium hydroxide from a plant situated in Kokkola, about 50 kilometres from the mining area. The mine’s run-rate is based on ore reserves of some 9.3 million tons – enough for 13 years of operation. First production is expected to start in 2024.

Neal Froneman, CEO of Sibanye-Stillwater, said the investment was a “strategic partnership of complementary skills and capabilities” in which Sibanye-Stillwater would bring its mining knowledge to the project rollout.

The transaction also brings geographic diversification to Sibanye-Stillwater’s portfolio of mines which are predominantly in South Africa, with some PGM production in the US. Froneman has been critical of the South African government’s mining industry policies.

A third aspect of the deal is that there is currently no offtake agreement for lithium hydroxide from Keliber mine which provides Sibanye-Stillwater with a clean slate to participate in the downstream side of the electric vehicle battery market.

“Europe is rapidly becoming a leading hub for the manufacture of batteries for electric vehicles and Keliber’s location in Finland enables efficient transport of lithium hydroxide to European customers,” said Sibanye-Stillwater.

Froneman said last week that Sibanye-Stillwater was contemplating several investments in the battery metals market with the focus falling on assets that were in development stage or near-cash.

Announcing its full-year results on February 18, the group declared a final dividend of R9.4bn, equal to 321 South African cents a share, for its 2020 financial year following bumper profits and cash generation. It also approved R6.8bn in PGM and gold projects approved by the firm’s board on February 16.