Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Precious metals producer Sibanye-Stillwater (JSE:SGL) (NYSE:SBGL) said Thursday it had received approval from South African competition authorities to exchange selected assets for a 38% stake in South African DRDGOLD Ltd. (DRD), in a deal valued at R1.3 billion (roughly $108 million at today’s rates).
Deal gives Sibanye-Stillwater the option to increase its stake in DRDGold to 50.1%
The company, South Africa’s largest gold producer and the world’s third largest producer of palladium and platinum, said the deal gives it the option to buy another 13% of DRDGold shares – enough to give it control – which it might well do by injecting its uranium tailings into the deal.
“Should Sibanye-Stillwater elect to exercise the call option within a period of 24 months from the approval date (…) the company shall inform the Commission of its decision within 20 business days of exercising the call option,” it said in the statement.
The assets Sibanye is transferring have probable gold mineral reserves of 3.82 million ounces, it said. And while the miner plans to retain long-term exposure to the West Rand tailings retreatment project (WRTRP) in South Africa, it’s leaving the development of such endeavour to DRDGOLD.
WRTRP is a large-scale, long-life surface tailings retreatment that will retreat material with a 35% higher gold content than the material treated by DRDGold at its flagship Ergo metallurgical plant on the East Rand.
The transaction virtually doubles DRDGold’s gold reserves, giving it immediate access to facilities that can generate cash for it in a matter of months. It also cuts overhead unit costs through increased production and puts an end to DRDGold’s single asset operating risk.
Neither the Cooke nor the Ezulwini gold and uranium tailings treatment plants are part of the deal, at least for now.
