Sibanye-Stillwater has announced enhancements to the historical Marikana chrome contract and signed a new chrome management agreement (CMA) with the Glencore Merafe venture, which is expected to optimise value from future chrome production for all parties.
Sibanye has partnered with third parties, including the Glencore Merafe venture, to recover and market chrome produced by its SA platinum group metals (PGM) operations.
Chrome is an important by-product of PGM production, and the SA PGM operations are, collectively, a significant global chrome ore producer. Chrome is a key component in stainless steel production due to its corrosion resistance properties and is also used in the production of alloy steels, providing strength and hardness to materials.
“We are excited about the continued relationship with the Glencore Merafe venture. We expect the CMA to immediately enhance cash flow from the SA PGM operations and by leveraging potential operational synergies and reducing costs, deliver substantial value over the longer term,” Sibanye CEO Neal Froneman said.
The agreements will unlock “significant shared value”, Sibanye said.
The enhanced Marikana contract provides for the accelerated completion of delivery of the required chrome volumes, which will expedite the close-out of the legacy agreement previously concluded between Lonmin and the Glencore Merafe venture, Sibanye said in a statement on Wednesday.
“Together with the CMA, this will allow greater exposure to chrome prices and incentivise future chrome production growth, realising significant value for Sibanye-Stillwater and enhance value creation opportunities for the Marikana operation,” the company said.
The majority of the chrome recovery plants (CRPs) at Sibanye-Stillwater’s SA PGM operations will be operated by the Glencore Merafe venture once the CMA is effective, enabling both parties to leverage synergies and increase chrome output.
The enhancements to the Marikana contract are expected to accelerate the completion of delivery of contracted chrome volumes by about 20 years, through increasing feed and improving recoveries from the Marikana CRPs.
After the expiry of the Marikana contract and the Marikana CRPs becoming subject to the CMA, accelerated delivery will increase Sibanye-Stillwater’s share of free cash flow from chrome production from the Marikana CRPs, it said.
There are also operational synergies and Glencore will leverage its processing expertise to optimise chrome production yields and reduce operational costs across the plants
“The improved economics of Sibanye-Stillwater’s chrome production resulting from the transaction, are expected to enhance the inherent value and commercial viability of development and extension projects at the SA PGM operations, which are currently being assessed,” Sibanye said.
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