Sibanye, DRDGold plan partnership deal
SIBANYE-Stillwater yesterday announced plans to vend some of its gold surface processing assets and tailings to DRDGold in exchange for a 38 percent stake worth R1.3 billion.
The company said that it had an option to increase its ownership in DRDGold to 50.1 percent within two years.
Chief executive Neal Froneman said: “We are excited about the inherent potential in the investment and look forward to partnering with DRDGold in growing an international, industry-leading, surface retreatment business.”
Froneman said that Sibanye-Stillwater would realise immediate value for underutilised surface infrastructure and tailings storage facilities while retaining upside to the West Rand Tailings Retreatment Project (WRTRP) and future growth in DRDGold.
“Our stakeholders in the region also stand to benefit from the future development of this long life surface reclamation project.”
As part of the deal, DRDGold is expected to develop Sibanye’s WRTRP, which included the Driefontein 3 dump in phases.
Phase 1 was estimated to be commissioned within a year after the implementation of that deal and it was expected to see the construction of a reclamation pump station and slurry pipeline at the Driefontein 5 dump among others.
However, the Cooke and Ezulwini plants and associated uranium were not part of the deal.
The deal is expected to boost DRDGold, which operates low-grade tailings.
The company anticipated an increase of about 92 percent in gold reserves to 5.75 million ounces from 2.99 million ounces.
The acquisition of the surface assets that would also provide short-term cash flows, with low capital expenditure, to support future growth and development.
It would also provide potential to increase production and revenue, and an extended life of mine.
DRDGold also said that the introduction of Sibanye-Stillwater as a substantial and supportive shareholder enhanced potential further corporate development and growth
Rene Hochreiter, an analyst at Noah Capital, said that the deal would improve DRDGold’s yield by between 20 percent and 38 percent, compared to its current 0.18 gram-a-ton yield, while Sibanye-Stillwater would benefit by having “dormant assets brought to book years earlier than they would have been in the normal course of events”.
“DRD in our view was up against low grades and high, relatively speaking, unit costs. Without this deal, it would have languished near the bottom of our rankings of South Africa’s gold shares,” said Hochreiter.