Sibanye-Stillwater has entered into various agreements with DRDGOLD in Sibanye-Stillwater will exchange selected surface gold processing assets and tailings storage facilities for c.265 million newly issued DRDGOLD shares.
This will result in Sibanye-Stillwater holding 38% of the issued share capital of DRDGOLD, post the transaction.
At the current DRDGOLD share price of R4.9 this equates to c.R1.3 billion of crystallised value.
The transaction includes the following assets:
- Tailings storage facilities (TSFs) − Driefontein 3 and 5, Kloof 1, Venterspost North and South, Libanon
- Active TSFs: − Driefontein 4
- The land required for future development of a Central Processing Plant(CPP), a Regional Tailings Storage Facility (RTSF)and return water dam
- Surface gold processing plants − Driefontein 2 plant (DP2), Driefontein 3 plant (DP3), WRTRP pilot plant (for on-going WRTRP gold recovery optimisation) (together referred to as the Selected Assets).
The following currently active TSFs will also be transferred, for no additional consideration, once they have been decommissioned by Sibanye-Stillwater:
- Driefontein 1 and 2
- Kloof 2
The Selected Assets, with the addition of the currently active TSFs, have Probable gold Mineral Reserves of 3.82 Moz and Probable uranium Mineral Reserves of 42.9 Mlb.
The transaction excludes the Cooke uranium and gold assets which comprise: the Cooke TSF, Millsite TSF and the Cooke surface gold plant as well as the Ezulwini gold and uranium plant and associated Ezulwini 4 TSF.
The Cooke and Ezulwini TSFs contain Probable gold Reserves of 2.401 Moz and Probable uranium Reserves of 54.26 Mlb.
Sibanye-Stillwater retains full ownership of these assets and the right to process and deposit this material onto the RTSF, subject to contributing their proportionate capital and operating costs. As such, Sibanye-Stillwater retains full exposure to a higher uranium price environment.
Sibanye-Stillwater and DRDGOLD have simultaneously entered into an option agreement in terms of which Sibanye-Stillwater will have the option to subscribe for a sufficient number of DRDGOLD ordinary shares to attain a 50.1% shareholding in DRDGOLD for up to 24 months post completion of the transaction.
The option has to be exercised in whole, anytime within the option period. The subscription price for the option shares shall be at a 10% discount to the 30 day volume weighted average traded price of DRDGOLD shares on the day prior to the date of exercise.
Rationale for the transaction
The transaction allows Sibanye-Stillwater to immediately crystallise c.R1.3 billion in value from the Selected Assets, while partnering with DRDGOLD to further develop the WRTRP.
Furthermore, this partnership presents an opportunity, in an exciting mining segment, to leverage off DRDGOLD’s proven surface retreatment capabilities with the potential to capitalise on further growth opportunities both locally and abroad.
DRDGOLD has significant experience in TSF reclamation and has a proven track record of:
- Optimisation of innovative technology driven processing and
- Proven project management expertise for the execution and implementation of surface processing infrastructure development
Commenting on the transaction, Neal Froneman, CEO of Sibanye-Stillwater, says: “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. Sibanye-Stillwater will realise immediate value for underutilised surface infrastructure and TSFs, while retaining upside to the West Rand Tailings Retreatment Project and future growth in DRDGOLD.”
DRDGOLD and its strategy for the Selected Assets
DRDGOLD has a network of surface assets that is unrivalled in South Africa and is focused on optimising these assets in order to increase gold production and extend its operational life. DRDGOLD intends developing the Selected Assets through a phased approach.
The first phase will include upgrading the existing Driefontein 2 and 3 plants to process tailings from the high grade Driefontein 5 TSF. Phase 1 must be completed within 24 months after the closing of the transaction while commissioning is expected to take 12 months and will include:
- Construction and upgrading of relevant pump stations and slurry pipelines and associated process water pump station and pipeline
- Upgrading of the Driefontein 2 and 3 plants from their name plate capacity of 315 000 tpm to between 400 000 to 600 000 tpm for processing of higher tailings volumes
- Potential upgrading of the Driefontein 4 TSF for additional tailings storage capacity
- Refurbishment of conventional Carbon in Leach treatment plants (DP2&DP3)
Further evaluation of all the TSFs through the pilot plant located at DP3 within 24 months.
The evaluation of each resource will include:
- Bulk samples to be trucked to DP3 plant for evaluation
- CIL, milling, flotation and concentrate leaching
- Blending of various resources to determine the optimal combination and ratio Phase 1 is expected to be cash generative with minimal upfront capital investment required.
These cash flows will be prioritised for the development of subsequent phases. Outputs from Phase 1 will enable DRDGOLD to refine the original WRTRP process and engineering design as well as financial and capital models for Phase 2.
Phase 2 will deliver a central, high-volume, CPP capable of processing at least 1 Mtpm of tailings and development of a new RTSF including associated pipeline infrastructure, within an additional 24 month period.