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Acquisition of the Rustenburg mining and concentrating operations from Anglo American Platinum
SIBANYE GOLD LIMITED
(Reg. No. 2002/031431/06)
(Incorporated in the Republic of South Africa)
Share Code: SGL
ISIN Code: ZAE000173951
Issuer Code: SGL
(“Sibanye” or “the Company”)
SIBANYE ANNOUNCES THE ACQUISITION OF THE RUSTENBURG MINING AND CONCENTRATING
OPERATIONS FROM ANGLO AMERICAN PLATINUM LIMITED (“AAP”)
1. INTRODUCTION
Shareholders are advised that on 8 September 2015, Sibanye has via a subsidiary
company entered into a suite of transaction agreements (the “Transaction
Agreements”), with Rustenburg Platinum Mines Limited (“RPM”), a wholly owned
subsidiary of AAP to acquire the Bathopele, Siphumelele (incl. Khomanani), and
Thembelani (incl. Khuseleka) mining operations, two concentrating plants, an on-
site chrome recovery plant, the Western Limb Tailings Retreatment Plant,
associated surface infrastructure and related assets and liabilities on a going
concern basis including normalised levels of working capital (the “Rustenburg
Operations”) (the “Transaction”). Consistent with its transformation objectives,
Sibanye will be including a consortium of Broad Based Black Economic Empowerment
stakeholders (“BBBEE Stakeholders”) such that, at the closing of the Transaction
(“Closing”) Sibanye will own 74% of the Rustenburg Operations, with the BBBEE
stakeholders owning 26%.
The purchase consideration comprises an upfront payment of R1.5 billion (“Upfront
Payment”) at Closing and a deferred payment calculated as being equal to 35% of
the distributable free cash flow generated by the Rustenburg Operations over a
six year period from the later of Closing or 1 January 2017 (“Deferred Payment”),
subject to a minimum payment of R3.0 billion, as further set out in section 3
(the “Purchase Price”).
2. TRANSACTION RATIONALE
The Transaction is consistent with Sibanye’s strategy to grow its business in
order to enhance and sustain its position as an industry leading dividend paying
company. The Transaction represents a meaningful entry for Sibanye into the
Platinum Group Metals (“PGM”) sector, securing over 800,000 ounces of annual 4E
PGM production and a large high quality resource of over 88 million oz of 4E PGMs
which offers the potential for substantial LOM extensions and/or growth. Through
the Transaction, Sibanye will become a leading global multi-commodity company
predominantly active in the precious metals industry. Sibanye will be the eighth
largest gold producer globally, the largest gold producer from South African
mines and the fifth largest global PGM producer.
Neal Froneman, CEO of Sibanye commenting on the Transaction said: “We have for
some time indicated our interest in participating in the PGM sector and believe
that these assets provide an attractively priced entry at an advantageous moment
in the price cycle. The Rustenburg Operations are similar in nature to Sibanye’s
current gold operations and, after extensive engagement with AAP and completing a
thorough due diligence, we are confident that we will be able to realise value
for our stakeholders by leveraging our successful operating model. The Rustenburg
Operations are well positioned as a platform to grow regionally within the PGM
sector and benefit from a recovery in PGM market conditions. The outcome is a
sensible commercial transaction, which is strategically advantageous for both
parties.”
3. THE TRANSACTION
The Transaction Agreements comprise a Sale and Purchase Agreement, Sale and Toll
Treatment of Concentrate Agreement, Use and Access Agreement and Parent Company
Guarantee. These Transaction Agreements provide for, inter alia, the following:
3.1 Purchase Price
A subsidiary of Sibanye, Sibanye Rustenburg Platinum Mines Proprietary Limited
(“the Purchaser”) will acquire 100% of the Rustenburg Operations from RPM.
The Purchase Price will be settled via the Upfront Payment and the Deferred
Payment and will be paid by the Purchaser to RPM on the terms set out below:
a. Upfront Payment
The Upfront Payment of R1.5 billion to be paid by the Purchaser to AAP, will be
settled at Closing, at Sibanye’s election, in cash or through the issue of new
ordinary shares in the share capital of Sibanye. Any share issuance to AAP will
be based on the 20 day volume weighted average price (“VWAP”) of Sibanye’s shares
on the JSE Limited (“JSE”) ending on the sixth trading day prior to Closing.
b. Deferred Payment
In addition to the Upfront Payment, RPM shall be entitled to a Deferred Payment
calculated as 35% of the distributable free cash flows generated by the
Rustenburg Operations on an annual basis for a period of six full years
commencing from the later of 1 January 2017 or Closing (such later date being
"the Start Date", and such six year period being "the Initial Period")
(“Distributable Free Cash Flow Payments”) on the following terms:
- The Distributable Free Cash Flow Payments shall be calculated and paid on an
annual basis calculated for a period commencing on 1 January and ending on
31 December of each calendar year of the Initial Period, except that for the
first and last calendar years of the Initial Period, the Distributable Free Cash
Flow Payments will be calculated with reference only to those full months falling
into the Initial Period;
- The distributable free cash flows for determining the Distributable Free Cash
Flow Payments shall be calculated by taking operational cash flows pre-working
capital movements minus capital expenditure. Allocated overheads, tax and royalty
related payments shall be considered as cash outflows for the purpose of
distributable free cash flow purposes, whereas the payment of dividends or other
distributions, exceptional items and the service or repayment of any intra-group
loan obligations shall not be taken into account. The calculation will be
referenced to audited accounts for the Purchaser, effectively ring-fencing the
Rustenburg Operations;
- The aggregate deferred payment over the Initial Period will total no less than
R3.0 billion (the “Minimum Deferred Payment”);
- To the extent there is an outstanding Minimum Deferred Payment balance at the
end of the Initial Period, the Purchaser shall have the option to extend the
period in which RPM is entitled to receive Distributable Free Cash Flow Payments
(the “Extended Payment Period”) for a further period of up to two years or until
the outstanding Minimum Deferred Payment balance has been reduced to nil,
whichever is earlier;
- Should the outstanding Minimum Deferred Payment balance remain positive at the
end of the Extended Payment Period, or at the end of the Initial Period in the
event that the Purchaser elects not to extend the Initial Period, the Purchaser
will pay the outstanding Minimum Deferred Payment balance in cash or through the
issue of new ordinary shares in the share capital of Sibanye on same basis as
described above.
3.2 Transitional arrangements
In the event that, after Closing, the Rustenburg Operations generate negative
distributable free cash flows in either 2016, 2017 or 2018, RPM will be required
to make a payment to the Purchaser such that the distributable free cash flow for
the relevant year is equal to zero, but such payments by RPM shall not exceed:
- In the year of the Closing: R267 million pro-rated for the number of remaining
full months in the calendar year, post the end of the month that Closing occurred
(the “Initial Pro-rata Amount”);
- In each full calendar year post the year in which Closing occurred, until
31 December 2018: the Initial Pro-rata Amount plus R267 million for each
subsequent full calendar year, less any payments made in respect of previous
years.
3.3 Purchase of Concentrate (“PoC”) and Processing terms
For the period from Closing to 31 December 2018 (the “PoC Period”), all
concentrate produced from the Rustenburg Operations will be sold to RPM on pre-
agreed PoC terms.
For a further period of eight years post the PoC Period (the “Toll Treatment
Period”), RPM will undertake the smelting and refining operations in respect of
the Rustenburg Operations on a toll treatment basis, on pre-agreed terms. Sibanye
will therefore gain access to PGM metals (Pt, Pd, Au and Rh) produced from 2019
onwards for its own marketing purposes.
4. BBBEE STAKEHOLDERS
Sibanye will facilitate the introduction of a BBBEE Stakeholder consortium which
will own 26% of the Purchaser. Discussions in respect of the acquisition of such
shareholding are currently underway and it is envisaged that it will be vendor
financed by Sibanye on market related terms and conditions.
The BBBEE Stakeholders comprises the following broad based partners:
- Employees Trust;
- Community Development Trust;
- Royal Bafokeng Holdings; and
- Bakgatla-Ba-Kgafela Traditional Community.
5. OVERVIEW OF THE RUSTENBURG OPERATIONS
The Rustenburg Operations are located in the western limb of the Bushveld complex
in South Africa which contains over 70% of the global platinum resource base. The
Rustenburg Operations exploit the PGM bearing Merensky and UG2 reefs and comprise
the Bathopele, Thembelani (incl. Khuseleka) and Siphumelele (incl. Khomanani)
mines as well as other assets listed above. The Rustenburg Operations operates
under a mining right covering 152 square kilometres, with a strike length of
28 kilometres.
Salient features of the Rustenburg Operations are:
- Average annual 4E PGM production: 800,000 oz (incl. 500,000 oz platinum)
in the next five years;
- 4E PGM Reserves of 9.7 million oz(i) as at 31 December 2014; and
- 4E PGM Resource of 88.8 million oz(i) as at 31 December 2014.
6. CONDITIONS PRECEDENT
The implementation of the Transaction is both subject to and conditional on the
fulfilment of conditions precedent customary for a transaction of this nature and
include, inter alia, the following:
- The approval of the Transaction and passing of such resolutions as may be
required by Sibanye and Sibanye’s shareholders;
- The approval of the Transaction, as may be required, by Sibanye’s existing
lenders;
- The approval of the Transaction by the competition authorities of the Republic
of South Africa and any other countries, to the extent required;
- All necessary consents being obtained from the Department of Mineral
Resources, to the extent required;
- All necessary approvals being obtained from the JSE and New York Stock
Exchange to the extent required; and
- No material adverse change in respect of the Rustenburg Operations.
Sibanye and RPM commit to engage the relevant authorities and affected
stakeholders in order to fulfil the Conditions Precedent to enable the
Transaction to become unconditional as soon as possible. Closing is expected
within the following 12 months.
7. FINANCIAL INFORMATION
The net asset value of the Rustenburg Operations, in RPM’s accounts, as at the
end of June 2015 is R7.7 billion.
The profit/(loss) attributable to the Rustenburg Operations, in RPM’s accounts,
for the six months ended June 2015 is (R0.5 billion).
8. CATEGORISATION OF TRANSACTION
In terms of the JSE Listing Requirements, the Transaction would be classified as
a category 1 transaction and the Circular to shareholders is being prepared which
will contain, inter alia, a notice of the General Meeting of Sibanye shareholders
seeking their approval for the Transaction. This circular will be sent out to the
shareholders in due course.
9. IMPLEMENTATION OF THE TRANSACTION
Subject to the Transaction becoming unconditional, it is expected to take
approximately 12 months to implement.
10. WITHDRAWAL OF CAUTIONARY
Following publication of the terms and financial information of the Transaction,
caution is no longer required to be exercised by shareholders when dealing in
their Sibanye shares.
9 September 2015
Libanon
Corporate Advisor:
Qinisele Resources Proprietary Limited
Financial Advisor:
HSBC Bank plc
Sponsor:
J.P. Morgan Equities South Africa Proprietary Limited
South African Legal Advisor:
ENSAfrica
US Legal Advisor:
Linklaters LLP
(i) Snowden Mining Industry Consultants was contracted to a conduct detailed
numerical audit in 2014 of the data gathering, data transformation and reporting
related to Mineral Resources and Ore Reserves for the Bathopele, Khuseleka,
Siphumelele 1 and Thembelani mines. This review was completed by Ms Clementine
Clark and Mr Allan Earl of Snowden. Both Ms Clark and Mr Earl have the relevant
experience and skills to be considered Competent Persons with respect to the
SAMREC Code. Ms Clark has more than 10 years' relevant experience and is a
registered member of the South African Council for Natural Scientific
Professionals (member number 400135/11). Mr Earl has over 30 years' relevant
experience and is a Fellow of the Australasian Institute of Mining and Metallurgy
(member number 110247). Neither Snowden nor those involved in the preparation of
this report have any material interest in AAPL or in the operations considered in
this report. Snowden is remunerated for the report by way of professional fees
determined according to a standard schedule of rates which is not contingent on
the outcome of this report.
This press release is for information purposes only and does not constitute or
form part of an offer to sell or the solicitation of an offer to buy or subscribe
to any securities of Sibanye. The securities referred to herein have not been and
will not be registered under the United States Securities Act of 1933 (the
"Securities Act") or with any securities regulatory authority of any state or
other jurisdiction of the United States and may not be offered, sold, resold,
transferred or delivered, directly or indirectly, in the United States except
pursuant to registration under, or an exemption from the registration
requirements of, the Securities Act. There will be no public offering of
securities in the United States or any other jurisdiction.
The securities have not been approved or disapproved by the US Securities and
Exchange Commission, and state securities commission in the United States or any
other US regulatory authority. Any representation to the contrary is a criminal
offence in the United States.
FORWARD LOOKING STATEMENTS
Certain statements included in this announcement, as well as oral statements that
may be made by Sibanye, or by officers, directors or employees acting on its
behalf related to the subject matter hereof, constitute or are based on forward-
looking statements. Forward-looking statements are preceded by, followed by or
include the words “may”, “will”, “should”, “expect”, “envisage”, “intend”,
“plan”, “project”, “estimate”, “anticipate”, “believe”, “hope”, “can”, “is
designed to” or similar phrases. These forward-looking statements involve a
number of known and unknown risks, uncertainties and other factors, many of which
are difficult to predict and generally beyond the control of Sibanye, that could
cause Sibanye’s actual results and outcomes to be materially different from
historical results or from any future results expressed or implied by such
forward-looking statements. Such risks, uncertainties and other factors include,
among others, Sibanye’s ability to complete the transaction, Sibanye’s ability to
successfully integrate the acquired assets with its existing operations,
Sibanye’s ability to achieve anticipated efficiencies and other cost savings in
connection with the transaction, Sibanye ’s ability to increase and uranium
production, the success of exploration and development activities and other
risks. Sibanye undertakes no obligation to update publicly or release any
revisions to these forward-looking statements to reflect events or circumstances
after the date of this announcement or to reflect any change in Sibanye’s
expectations with regard thereto.
This release includes mineral reserves and resources information prepared in
accordance with the South African Code for the Reporting of Exploration Results,
Mineral Resources and Mineral Reserves (the “SAMREC Code”), and not in accordance
with the U.S. Securities and Exchange Commission’s Industry Guide 7.
Date: 09/09/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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