Sibanye-Stillwater’s shares drop after it buys metals recycler Reldan for R3bn on its journey towards net zero

Bullish: Neal Froneman, the CEO of Sibanye-Stillwater, is on the acquisition trail. File

Bullish: Neal Froneman, the CEO of Sibanye-Stillwater, is on the acquisition trail. File

Published Nov 10, 2023


Shares in Sibanye-Stillwater yesterday dropped after it said it had acquired US-based metals recycler Reldan Group of Companies (Reldan) for $155.4 million (R2.9 billion) as its CEO, Neal Froneman, hunts for worthy green metals assets.

By 2pm the shares were nearly 4% lower at R23.12 on the JSE.

The deal was at an enterprise value of $211.5m, with a cash purchase consideration payable of $155.4m.

Froneman is on the acquisition trail after the group, which has platinum group metals (PGM), gold and nickel operations in Africa, America and Europe, last week announced it had purchased a Tasmania copper mine in Australia for $10m.

The company is also diversifying into lithium, after recently buying the Keliber project in Finland where it has “initiated the construction of the lithium concentrator” and development of the Syväjärvi open-pit mine.

This despite it saying last month that a restructuring exercise at its South African PGM operations could result in losses of more than 4 000 jobs.

Sibanye-Stillwater said the acquisition was expected to be value accretive and positively contribute to the earnings and cash flow from day one.

The deal was expected to close during the first quarter of 2024.

Froneman said: “The strategic acquisition of Reldan is a further pivotal step in our company’s commitment to sustainability and our journey toward net zero. Reldan’s exceptional environmental, governance, and safety standards position them as an industry leader, providing us with an exemplary platform to amplify our recycling efforts.

“We are excited to work alongside the Reldan management team and employees to seamlessly integrate and scale our operations, reinforcing our dedication to the advancement of green metals and recycling,” he said.

Reldan is a Pennsylvania-based recycling group which reprocesses various waste streams, including industrial waste such as semiconductor scrap and plating waste, etc., and electronic waste such as mobile phones and tablets, etc., to recycle green precious metals.

Sibanye-Stillwater said the acquisition of Reldan complemented its US PGM recycling business in Montana, US, and enhanced its global exposure to the circular economy, providing a solid base for further expansion.

For 2022, Reldan generated $371m revenue, $42m Ebitda, $39m in earnings and $28m in free cash flow. Sibanye-Stillwater said Reldan had an established a presence in Mexico and India.

Seleho Tsatsi, an investment analyst at Anchor Capital, said Sibanye-Stillwater was a naturally acquisitive company. Its current PGM business was built through acquisition mostly during the previous long downturn in the PGM market.

The company had since identified green metals as the next area in which it wants to build a meaningful business. Commodities such as copper, nickel and lithium had been identified as some of the materials that the company wanted to have in its portfolio.

“The acquisition that Sibanye-Stillwater has announced today is one of several that it has done since it declared its intent to get into green metals. Interestingly, it is doing this at a time when PGM prices have really come under pressure, reducing Sibanye-Stillwater’s profitability. This dynamic of investing into the new area of green metals whilst the PGM market contends with a strong downturn is noteworthy,” Tsatsi said.

Malose Mamashela, an investment analyst at Mergence Investment Managers, said the deal aligned with Sibanye-Stillwater’s strategic positioning into green or future-facing metals, with the acquisitions forming part of the group’s international (Australia, France, Finland and Canada) assets.

“However the performance of these strategic assets has been challenged. The auto-catalyst recycling business in Canada remains constrained by Stillwater mine performance as the recycling facility can’t be operated on recycled material alone.”

Mamashela said management had indicated in the recent operating update that the Sandouville nickel refinery in France was not commercially viable at current nickel prices even after operational improvements, while capital expenditure for the Keliber lithium project in Finland had been deferred to next year.

“Sibanye-Stillwater’ has also recently exercised its option to acquire 100% of Mount Lyell for a consideration of $10m (a previously operated copper mine in Tasmania) from Vedanta Resources through its New Century zinc operation acquisition and it has also assumed full ownership of the Kroondal mine earlier than expected.

“All these transactions are happening even as it has entered into Section 189 consultations to restructure its SA PGMs and gold operations. We, therefore, think the concern over its balance sheet which currently has less flexibility than its PGMs peers, might have weighed on the share price and will likely continue to do so if the PGMs basket price remains under pressure,” Mamashela said.