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Sibanye-Stillwater digs deep to seal deal for Brazillian mining assets 

Neal Froneman, president and CEO of Aflease Gold. (Photo by Gallo Images / Financial Mail / Robert Tshabalala)

Sibanye-Stillwater said on Tuesday it had sealed the deal to acquire the Santa Rita nickel and the Serrote copper mines in Brazil for a cool $1-billion. Sibanye’s diversification and growth drive, both in terms of geology and geography, shows no sign of abating under its wheeling and dealing CEO Neal Froneman. 

Sibanye said on Monday, in response to a report in the Wall Street Journal, that it was in talks to acquire the assets. Under Froneman, things move quickly and the trigger has now been pulled.  

“The transaction is a significant additional step in Sibanye-Stillwater’s ongoing strategy to position the business for continued value creation during our transition into a climate change resilient business,” Froneman said in a statement. 

The latest Sibanye deal follows a trio of transactions already this year in the US, France and Finland which have raised the company’s involvement in the battery or green metals space, which is seen powering the electric vehicle (EV) revolution and the wider transition to a low-carbon economy. 

“Santa Rita and Serrote are both low-cost and low carbon intensity operations with strong cultural alignment with Sibanye-Stillwater’s focus on health and safety, the environment and local communities,” Sibanye said. 

And both mines will start delivering cash flow immediately to Sibanye’s bottom line. 

Santa Rita is one of the largest nickel-cobalt sulphide open-pit mines in the world. Nickel and cobalt are both key ingredients in EV vehicles. 

“The mine produces a sulphide concentrate suitable for downstream processing to produce battery precursors and has outstanding infrastructure resulting from significant historical investment,” Sibanye said. 

When Froneman goes on the hunt for new assets, as the Canadians say, he comes loaded for bear. 

Sibanye has been delivering record results, mostly because of record platinum group metals (PGM) prices, and at the end of June it had a healthy balance sheet with net cash of over $700-million. Its cash flows remain liquid and it has an option to refinance an existing $380-million corporate bond on more favourable terms.  

“Implementation of the transaction is expected in the fourth quarter of 2021, being the effective date and will be funded from internal reserves,” Sibanye said. 

Sibanye started almost a decade ago as a spin-off from Gold Fields, taking over the latter’s deep-level and labour-intensive South African gold mines. At the start, it was seen as a “dividend play” mining mature assets that were generating plenty of cash. The company then moved into PGMs in South Africa, acquiring the labour-heavy assets of Anglo American Platinum as it, like Gold Fields, made a hard pivot to mechanisation. 

Then Sibanye went offshore, snapping up the palladium-rich Stillwater mine in the US state of Montana, and the juggernaut has kept on rolling. Having a global production base not only provides exposure to “green” metals. It also de-risks exposure to the South African mining environment, which is riddled with risk: power shortages, policy uncertainty, wild currency swings, social and labour unrest, and a “procurement mafia trying to shake down companies for contracts, Sopranos style. 

Speaking of labour, the latest Sibanye deal will also likely raise the ire of some of the unions — notably the National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union (Amcu) — which are in wage talks at the moment with the company’s gold division.

Both unions have criticised Sibanye for making overseas acquisitions while offering wage hikes in its gold sector that are just in line with or lower than current inflation rates. Sibanye says it does not cross-subsidise its divisions and its growth is aimed at delivering value to a range of stakeholders. 

Sibanye was due to hold a briefing later on Tuesday to discuss the latest transaction and its green metals strategy. DM/BM



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