Johannesburg - Anglo American Platinum’s sale of its Rustenburg Platinum Mines unit - to Sibanye Gold for at least R4.5 billion - will turn Sibanye into the world’s eighth largest platinum producer.
The two miners announced in separate statements on Wednesday that Amplats would sell its Rustenburg mining and concentrating operations to the gold producer for R4.5 billion, with a maximum cap of R20 billion depending on profit targets, which will be paid for in several tranches. As part of the deal, Sibanye will sell platinum concentrate back to Amplats.
The Rustenburg Operations had a net asset value of R7.7 billion as at the end of June, but came in with attributable after tax losses of R500 million. Amplats also aims to sell its Union asset as it prioritises shallower and more mechanised operations, such as the Mogalakwena pit.
Sibanye is an independent South African mining group that owns and operates four underground and surface gold operations – the Cooke, Driefontein and Kloof operations in the West Witwatersrand region, and the Beatrix Operation in the southern Free State province. It claims to be SA’s largest individual producer of gold and one of the world’s ten largest gold producers.
Sibanye notes the deal fights in with its strategy to grow its business and is a “meaningful entry for Sibanye” into the platinum group metals sector, as it secures more than 800 000 ounces of annual PGM production and a large high quality resource of over 88 million oz of PGMs.
The deal will make Sibanye the world’s eight-largest platinum producer, it says. CEO Neal Froneman, says “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”.
Froneman says the Rustenburg operations are similar in nature to Sibanye’s current gold operations.
Amplats’ Rustenburg operations comprise the Bathopele, Siphumelele and Thembelani mining operations (which include the integrated Khuseleka & Khomanani mining operations), two concentrating plants, an on-site chrome recovery plant, the Western Limb Tailings Retreatment plant and associated surface infrastructure and related assets and liabilities.
The mines combined employ 16 000 workers.
Milestone
Amplats CEO Chris Griffith says the sale represents a “significant milestone in the repositioning of our portfolio”. He notes the Rustenburg Operations “are quality assets with long-term and sustainable potential under Sibanye’s control, given their proven and successful track record of operating conventional mines in South Africa”.
Griffith adds the miner will continue to pursue its strategy of positioning the company as a high quality, largely mechanised operator yielding high margins.” We are focusing on our core assets and exiting those assets we have identified as non-core in a responsible manner, consistent with the objectives of the Mining Charter.”
Anglo American Platinum is the world's largest primary producer of platinum, accounting for about 38 percent of global annual supply. In July last year, it said it would sell many local mines after five months of strikes weighed on production and profitability.
Amplats, in a notice to shareholders, explains that in 2012, it embarked an a review of its portfolio because of “structural” changes happening in the platinum sector. Since then, the sector has been under the whip as prices for the precious metal have fallen to multi-year lows and miners are reporting losses.
The miner restructured the business to remove loss-making ounces and align production with market demand. “This resulted in the consolidation of Rustenburg from five to three mines and Union from two to one mine, removing 350 000 oz of unprofitable platinum production.”
It subsequently implemented a cost and capital prioritisation programme, which led to revised operational mine plans, cost savings and revenue enhancements with a total benefit of R4.2 billion. Last year, the miner said it would reposition its portfolio to focus on low-cost production through shifting towards mechanised operations.
Because of the number of operations it has - 8 own mines, 7 joint venture mines and 2 projects - it decided some operations would be better off owned by a company that could provide greater management ownership, and would not be fighting for allocation of capital.
Sibanye will also introduce an empowerment partner that will own 26 percent of the Rustenburg operations and talks are currently underway, it says. The deal is subject to conditions, but - once these are completed - should take 12 months to wrap up.
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