Business Day

Sibanye and DRDGold will ben­e­fit from union

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In an en­vi­ron­ment where Sibanye-Still­wa­ter’s share­hold­ers are re­luc­tant to in­vest any­thing more in South African projects, leav­ing a large tailings retreatmen­t project un­de­vel­oped, the mar­riage of forces be­tween SA’s largest do­mes­tic gold pro­ducer and tailings retreatmen­t spe­cial­ist DRDGold makes per­fect sense.

The ben­e­fits will flow both ways. Sibanye se­cures a 38% in DRDGold, which will es­sen­tially de­velop the West Rand tailings retreatmen­t project.

The project was con­ceived by Gold Fields and care­fully stud­ied and added to by Sibanye, which was formed when Gold Fields un­bun­dled three deeplevel gold mines into a newly formed com­pany.

DRDGold at a stroke gets its hands on a large, new high­grade re­source and a fresh foot­print in which to op­er­ate.

DRDGold, which pro­duces about a tonne of gold ev­ery three months from its tailings re­sources south and east of Jo­han­nes­burg, is an ex­pert tailings retreatmen­t com­pany and the per­fect fit for the Sibanye strat­egy to en­sure th­ese tailings are pro­cessed and a his­tor­i­cal en­vi­ron­men­tal prob­lem is cleared up in com­ing decades.

Far from be­ing the out­right buyer of the tailings from Sibanye, some­thing the DRDGold bal­ance sheet could not sup­port, the tailings com­pany now has a big-brother in­vestor who has the op­tion to grow its stake to 51% within two years and has big plans for DRDGold.

Sibanye CE Neal Frone­man, the most ac­tive head of a South African min­ing com­pany re­gard­ing forg­ing deals, wants to start ex­pand­ing DRDGold’s port­fo­lio, adding African as­sets to its busi­ness and use its spe­cial­ist knowl­edge to tap into com­modi­ties out­side gold.

ArcelorMit­tal SA’s em­pow­er­ment part­ner Likamva Re­sources is im­ple­ment­ing the broad-based em­pow­er­ment struc­ture con­di­tional to its deal with SA’s largest steel maker. It will fin­ish this process by Novem­ber 2018.

The deal, signed in Septem­ber 2016, has Likamva, a 100% black-owned and 58% black woman-owned com­pany, ini­tially hold­ing a 17% stake in ArcelorMit­tal SA. Likamva is re­quired within 24 months of this date to in­tro­duce broad­based share­hold­ers mainly from com­mu­ni­ties liv­ing around ArcelorMit­tal SA op­er­a­tions.

Fol­low­ing this, its share will be re­duced to 12%, and broad­based par­ties will hold 5%.

Likamva says it is half­way through the process of bring­ing in com­mu­ni­ties af­ter meet­ing with en­trepreneur­s, of­fi­cials of the Depart­ment of Trade and In­dus­try, elected com­mu­nity lead­ers and ArcelorMit­tal SA.

But it is a com­plex process in­volv­ing get­ting to know the com­mu­ni­ties, their needs, and the leg­isla­tive frame­work for th­ese struc­tures.

The R2.2bn broad-based black eco­nomic em­pow­er­ment trans­ac­tion is a far cry from the ear­lier — and thank­fully failed — R9bn em­pow­er­ment trans­ac­tion in­volv­ing in­ter­ests linked to the Gup­tas that would have drowned in debt long ago.

But Likamva di­rec­tors do in­clude Yakhe Kwinana — who has been a board mem­ber of both South African Airways and the Ja­cob Zuma Foun­da­tion.

Mean­while, the ArcelorMit­tal SA Em­ployee Em­pow­er­ment Share Trust has a 5.1% stake in the com­pany through no­tion­ally funded shares worth about R525m is­sued by ArcelorMit­tal SA. This is in ad­di­tion to the ex­ist­ing Ik­a­geng Em­ployee Share Op­tion Scheme, which was in­tro­duced in 2015.

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