Sibanye cementing itself with DRDGold swap

Sibanye-Stillwater’s consolidation of the SA mining sector continued unabated as it wrapped up an asset swap in exchange for shares in DRDGold, giving it a 38% stake in the tailings retreatment specialist and lining itself up for control.

Sibanye is by far the most active mining company in the mergers and acquisitions space in SA, mopping up a number of companies in gold and platinum group metals (PGMs).

It will cement its position as one of the world’s biggest sources of PGMs later this year if its all-share takeover bid for world number three platinum miner Lonmin and its South African mines, concentrators, smelters and refineries is successful.

In what was one of the smaller deals for Sibanye and one that resolved how best to unlock value from enormous piles of tailings and dumps, Wednesday marked the finalisation of a transaction in which Sibanye placed those tailings in DRDGold in exchange for a 38% stake worth R896m. Within the next two years, Sibanye may exercise an option to buy more shares in DRDGold at a 10% discount to the 30-day volume weighted average price, giving it up to 50.1% of the company.

Sibanye chief executive Neal Froneman said the deal unlocked value from “underutilised surface infrastructure” and kept the company exposed to the value of the tailings.

“Further value will be derived from the future development of this long-life surface reclamation project,” he said.

The deal was a “company changer” for DRDGold, its chief executive Niël Pretorius has said, boosting its reserve base by 90%.

Now that the deal was concluded, DRDGold would push ahead with the first phase of developing the assets it has secured in its Far West Gold Recoveries project.

It has raised a R300m loan to upgrade the Driefontein 2 plant to process tailings at a rate of 400,000 to 600,000 tons a month.

The ‘company changer’ will boost DRDGold’s reserve base by 90%