Sibanye-Stillwater has announced a $500m (R9.2bn) streaming agreement with Franco-Nevada (Barbados), a subsidiary of Franco-Nevada, for gold and platinum streams from its Marikana, Kroondal and Rustenburg operations.
This agreement allows Sibanye-Stillwater to monetise the future value of gold produced from these areas, enhancing its financial position. The deal is subject to approval from the South African Reserve Bank.
For the gold stream, the company will deliver gold ounces equal to 1.1% of 4E platinum group metals (PGM) ounces in concentrate until 87,500oz of gold is delivered, then 0.75% until 237,000oz. Thereafter, 80% of gold in concentrate will be delivered for the remaining life of the mine.
For the platinum stream, Sibanye-Stillwater will deliver platinum ounces equal to 1% of platinum in concentrate until 48,000oz is delivered, then 2.1% until 294,000oz.
The company will receive a production payment price equal to 5% of the spot platinum price on the delivery date. The platinum stream concludes after 294,000oz has been delivered.
Sibanye-Stillwater CEO Neal Froneman said: “We are pleased to have successfully concluded this value accretive transaction in partnership with Franco-Nevada. We have raised $500m of non-debt capital by primarily streaming gold, a minor component of the basket of metals produced from our SA PGM operations and a marginal and finite amount of platinum, which retains significant leverage to higher PGM prices, which we anticipate.
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“The group’s financial position has been reinforced at a competitive cost of capital. The financial support from Franco-Nevada further validates the quality and long-term viability of our PGM assets, which continue to generate superior shared value for our stakeholders, and we expect will continue for decades in the future.”
Franco-Nevada and Sibanye-Stillwater have also agreed to convert a 5% net profit interest on the Pandora property to a 1% net smelter return royalty.
The agreement will apply to any production from the Marikana, Kroondal and Rustenburg operations, including growth or replacement projects.
These operations possess extensive underground resources, offering potential for low capital cost, brownfields and replacement projects.
The projects, in various stages of pre-feasibility and feasibility studies, aim to maintain higher production levels and extend the life of operations.
Sibanye-Stillwater has the option to substitute gold deliveries for platinum deliveries under certain circumstances.
The $500m advance strengthens the group’s capital structure, improves balance sheet headroom and reduces net debt to adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) by between 0.70-times and 0.60-times, securing a sustainable financial position.
