[miningmx.com] – ANGLO American Platinum (Amplats) has agreed to sell its Rustenburg Platinum Mine and concentrator to Sibanye Gold for no less than R4.5bn of which R1.5bn would be paid upfront either in cash or Sibanye shares.
The transaction ends nearly two years of horse-trading which at one point saw Amplats say it was considering listing the Rustenburg and Union mines. The deal excludes Union section, although Chris Griffith, CEO of Amplats, said the firm was pressing on with a trade sale of the asset.
In terms of the proposed transaction, Amplats would be paid 35% of distributable free cash flow from the operations, after capital expenditure, but only from 2017, and for a six-year period. In addition, Amplats would foot losses incurred by the mines from 2016 to 2018 up to a maximum of R800m.
Amplats said the net asset value of the Rustenburg operations was R7.7bn as of June. The mines reported a loss of the six months ended June 30 of R500m.
In terms of processing concentrate produced from the Rustenburg mine, Sibanye has agreed to sell material to Amplats, which it will market, until 2018. Thereafter, Sibanye has the right to market its own refined platinum once Amplats has toll-treated it.
The transaction also includes a black economic empowerment transaction such that the Royal Bafokeng will become a shareholder, on a vendor-financed basis, as well as the Bakgatla-Ba-Kgafela Traditional Community, employees and nearby communities worth 26% of the Rustenburg Platinum Mine.
“We have for some time indicated our interest in participating in the PGM sector and believe that these assets provide an attractively priced entry at an advantageous moment in the price cycle,” said Neal Froneman, CEO of Sibanye Gold.
He added the transaction was strategically “sensible” for both parties and that Sibanye would focus on regional growth within the platinum growth metal sector, and to benefit from PGM market conditions.
The transaction, which is expected to take up to 18 months to clear, will transform Sibanye Gold into an 800,000 4E platinum group metal producer (500,000 platinum oz) and precipitate a possible name change to Sibanye Resources, said Froneman.
Commenting on whether further incursions will be made into the platinum sector, Froneman said in a media briefing: “We did not anticipate entry into Rustenburg Platinum Mine that only included one step.
He was less forthcoming on his outlook for platinum saying that his company has taken on-board the consensus views of investment analysts on the price. “We are not paid to speculate on the platinum price,” he said.
“The transaction was structured on an upfront commitment, an agreement to share in the cash flows, and if platinum price goes up, then we both benefit,” said Froneman. A market deficit in platinum supply would widen, he added.
The preference was for Sibanye to complete the upfront R1.5bn in cash, rather than in shares as set down as a financing option. Moreover, Griffith said Amplats would not be a long-term holder of shares in Sibanye and would distribute them “in a responsible manner” – a possible overhang, nonetheless, that Froneman said would be remedied as he had ready buyers for the shares.
Froneman added that the proposed transaction would not imperil the company’s pledge to pay dividends – a R1bn payout had been targeted for the current year – and that the firm’s 1x net debt to EBITDA ratio would not be challenged by the transaction.
Froneman told Miningmx on August 31 that the company could sustain an increase in net debt to about R10bn from the current R1.5bn. “There’s a whole menu of options and I think we can take R10bn of debt in addition to what we’ve got now,” he said.
