amplats
Thembelani 1 Shaft
Anglo American Platinum (Amplats) has agreed to sell its 85% interest in Union mine and its 50.1% interest in MASA Chrome to a subsidiary of Siyanda Resources.

Amplats will retain the Mortimer smelter operation.

Union mine and MASA Chrome are located in the Limpopo and North West provinces of South Africa and Union mine operates under a mining right covering an area of 119 square km.

Under the terms of the agreement, the transaction consideration comprises an initial disposal consideration of R400 million, payable in cash, as well as a deferred consideration based on 35% of cumulative positive distributable free cash flow paid annually as an earn-out, for a period of ten years from the effective date of the transaction.

The maximum transaction consideration receivable by the company is R6.4 billion. Amplats has no obligation to contribute towards any negative cash flow that may be generated by the disposal assets. It intends to use the proceeds of the transaction to reduce debt.

Chris Griffith, CEO of Amplats, commented on the transaction: “We are pleased to deliver another important milestone in the strategic repositioning of Anglo American Platinum’s portfolio. The Union mine and MASA Chrome operations are quality assets that I believe have long-term and sustainable potential under Siyanda’s ownership. This transaction is beneficial for both parties, while also creating a sustainable future for the operation.”

Purchase and toll treatment of concentrate

Siyanda Resources will sell concentrate produced by the Union mine to Amplats for a period of seven years from the effective date of the transaction on pre-agreed commercial terms and thereafter it will toll treat concentrate for the remaining life of Union mine.

The charge payable by Siyanda under the toll treatment arrangement will reflect smelting and refining costs as well as an economic return on the proportional share of the capital base that Amplats has invested in its processing assets.

The sale of Union mine and MASA Chrome advances Anglo American’s repositioning to focus on its most competitive assets, consisting of largely open pit and mechanised operations which will deliver higher margin production, a more highly skilled workforce, safer operations and a less complex organisation.

As at the company’s year ended 31 December 2016, the value of the net assets pertaining to the disposal assets was R1,654 million.

Reason for the transaction

In January 2013, Amplats announced its intention to reconfigure the assets and thereafter exit them. Since then, significant restructuring has been delivered at Union mine, including combining North and South mines into a single operation and placing North declines, South declines and the Mortimer Merensky concentrator on care and maintenance.

Operational improvements have also had a significantly positive effect on Union mine’s cost position and cash generation. Amplats however, has more value accretive capital options in its portfolio and would not prioritise capital investment into the assets that are being sold, and therefore feels it is not the best owner of these assets.