Mining group Sibanye-Stillwater has entered into a $500m streaming agreement with Canada-based Franco-Nevada Corporation, in exchange for the sale of gold and platinum streams from its Marikana, Kroondal and Rustenburg operations.
Sibanye-Stillwater CEO Neal Froneman said the transaction was value accretive.
“We have raised $500m (R8.8bn) of nondebt 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.”
Sibanye-Stillwater will receive a $500m upfront payment in exchange for gold ounces equal to 1.1% of 4E PGM ounces contained in concentrate until delivery of 87,500oz of gold, then 0.75% of 4E PGM oz contained in concentrate until total delivery of 237,000 oz of gold, then 80% of gold contained in concentrate for the remaining life of mine, it said in a statement on Thursday.
It will receive a production payment price equal to 5% per ounce of the spot gold price on the date of delivery until total delivery of 237,000oz of gold, which will increase to 10% of the spot gold price thereafter.
It will also receive platinum ounces equal to 1% of platinum contained in concentrate until delivery of 48,000oz of platinum, then 2.1% of platinum contained in concentrate until total delivery of 294,000oz of platinum, and then no further deliveries.
Sibanye-Stillwater will receive a production payment price equal to 5% of the spot platinum price on the date of delivery, the statement said.
The transaction is subject to approval from the SA Reserve Bank.
In addition, Franco-Nevada and Sibanye-Stillwater have agreed to convert the 5% net profit interest that Franco-Nevada holds on the Pandora property to a 1% net smelter return royalty.
Froneman said 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.
“We welcome this opportunity to continue to build our relationship with Franco-Nevada,” he said.
The stream monetises the future value of gold produced from the stream area. Gold is a small component of the total basket of metals produced from the stream area.
The platinum stream concludes after 294,000oz of platinum have been delivered (about 25 years) and represents a marginal amount of total annual platinum production from the stream area, which retains significant leverage to higher PGM prices.
Sibanye-Stillwater also has the option to substitute gold deliveries for platinum deliveries under the agreement, in certain circumstances.
Froneman added that the $500m advance amount further enhanced the group capital structure, improved balance sheet headroom and liquidity and reduced net debt.
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