Early settlement of the Marikana Bulk tailings treatment project’s metal purchase agreement
Sibanye Stillwater Limited
Incorporated in the Republic of South Africa
Registration number 2014/243852/06
Share codes: SSW (JSE) and SBSW (NYSE)
ISIN – ZAE000259701
Issuer code: SSW
(“Sibanye-Stillwater” or “the Group” or “the Company”)
Early settlement of the Marikana Bulk tailings treatment project’s metal purchase
agreement
Johannesburg, 4 March 2020: Sibanye-Stillwater (Tickers JSE: SSW and NYSE: SBSW)
advises that Western Platinum Proprietary Limited (“WPL”), Eastern Platinum Limited
(“EPL”) and Lonmin Limited (UK) (“Lonmin”) (collectively the “Purchasers”), now
subsidiaries of Sibanye-Stillwater and collectively known as the Marikana operations,
have entered into a Release and Cancellation Agreement (“the Release Agreement”) with
RFW Lonmin Investments Limited (“the Seller”) regarding the early settlement, of a
prior streaming agreement, on more favourable terms.
Salient Features:
• Sibanye-Stillwater early settles, a long-term streaming facility at Marikana, with
a current present value of US$81 million, for US$50 million in cash
• The settlement will be funded through a new short-term platinum prepay facility,
entered into with Merrill Lynch International (“Merrill Lynch”)
• The transaction will extinguish a high cost, secured, long-term financing
instrument, and replace it with a significantly lower cost, unsecured, short-term
facility, providing operational flexibility for the Marikana operations and the
ability to immediately market the now uncommitted Palladium and Rhodium metals to
realize optimal pricing opportunities
Transaction
In May 2016 Lonmin entered into a streaming transaction (“Metals Purchase Agreement”)
with the Sellers whereby the Sellers made an upfront payment of US$50 million to WPL
to enable WPL to fully finance the Bulk Tailing Treatment (“BTT”) Project, which
involves the re-mining of certain tailings dams owned by WPL and EPL. In return the
Purchasers had to deliver to the Sellers a portion of the produced metal (Platinum,
Palladium, Rhodium, Gold, Ruthenium and Iridium) from the BTT Project. The volume
of metal delivered to the Sellers was calculated as a portion of the total metal
produced from the BTT Project with defined guaranteed minimum deliverable amounts on
a monthly basis at an agreed price that varied between 16% and 20% of spot prices.
Furthermore, the Sellers were granted certain security over the BTT Project assets
until such time as a minimum amount of metal had been delivered.
The Release Agreement sets out the terms and conditions upon which the Purchasers
have purchased the Seller’s entire interest in the Metals Purchase Agreement for an
amount of US$50 million to be settled in cash. The Release Agreement is subject to
certain conditions precedent, which conditions are anticipated to be fulfilled by 6
March 2020.
Rationale
The Early Settlement allows Sibanye-Stillwater to acquire the Seller’s entire interest
in the Metals Purchase Agreement for a purchase price of US$50 million which when
valued using spot PGM prices at 27 February 2020, would have an attributable value
of approximately US$81 million.
The Early Settlement has been financed using a forward PGM sale agreement (“Prepay”)
with Merrill Lynch whereby WPL will receive a prepayment amount of US$50 million
(approximately R 764 million) in exchange for delivering 72,886 ounces of Platinum over
the period June 2020 to December 2020. The deliveries are subject to a floor price of
US$700 per ounce and a cap price of US$1,050 per ounce. WPL will, on delivery, receive
from Merrill Lynch the difference between spot prices and the floor price, subject to
a maximum of the cap price. The funding is expected to be accounted for under IFRS as
deferred revenue. The delivery obligation under the Prepay amounts to approximately
10% of WPL’s, and 3% of the Group’s planned 2020 4E production.
Utilising the Prepay financing for the Early Settlement of the Metals Purchase
Agreement extinguishes WPL’s commitment to deliver approximately 62,000 6E ounces
over the next six years at an estimated price of approximately US$255 per ounce into
the Metal Purchase Agreement, effectively allowing Sibanye-Stillwater to replace the
high cost long term Metals Purchase Agreement, inherited with the Lonmin acquisition,
with a significantly more favorably priced short term Prepay facility. The Pre-pay
facility is linked to Platinum metal only, enhancing WPL’s flexibility to market and
sell Palladium and Rhodium metals, realising optimal pricing opportunities in the
current market. Furthermore, the Purchasers are released of all security obligations
to the Seller, with no additional security obligations associated with the Prepay.
Prepay financing
The Prepay financing is senior unsecured, with a guarantor group guaranteeing the
outstanding obligations. The guarantors are Sibanye Gold Limited, Stillwater Mining
Company Limited, Sibanye Rustenburg Platinum Mines Proprietary Limited and Kroondal
Operations Proprietary Limited.
Notice is hereby given that, in terms of the provisions of Section 45(5) of the
Companies Act 71 of 2008 (the “Companies Act”), and pursuant to the special resolution
passed at the general meeting of the Company held on 28 May 2019 (the “General
Meeting”), the board of directors of the Company (the “Board”) has adopted a
resolution to guarantee the indebtedness of other members of the Group under the
Prepay, which guarantee constitutes the giving of direct and/or indirect financial
assistance to related- and inter-related companies and corporations of the Company
in terms of the provisions of Section 45(2) of the Companies Act.
Having considered all reasonable financial circumstances of the Company in terms of
and pursuant to the provisions of Section 45 as read with Section 4 of the Companies
Act, the Board satisfied itself that:
• immediately after providing the financial assistance referred to above, the Company
would satisfy the solvency and liquidity test contemplated in Section 4 of the
Companies Act;
• all relevant conditions and restrictions relating to the granting of such financial
assistance by the Company contained in the Company's memorandum of incorporation
are satisfied; and
• the terms and conditions on which such financial assistance is to be given are
fair and reasonable to the Company.
Small related party transaction
In terms of paragraph 10.7 of the JSE Listings Requirements ("Listings Requirements"),
the Early Settlement constitutes a small related party transaction as the Seller is an
associate (as defined in paragraph 10.1(b)(vii) of the Listings Requirements) of Sibanye-
Stillwater’s largest shareholder Gold One South Africa SPV (RF) Proprietary Limited (“Gold
One”) which held 16.25% of Sibanye-Stillwater, on the date the Release Agreement was
entered into on 24 January 2020 (and holds at 2 March 2020 12.26% of Sibanye-Stillwater).
The board of directors of Sibanye-Stillwater ("the Board") is therefore required, pursuant
to section 10.7 (b) of the Listings Requirements to provide the JSE with written
confirmation, from an independent professional expert, that the terms of the Early
Settlement are fair insofar as Sibanye-Stillwater shareholders are concerned.
In this regard, BDO Corporate Finance Proprietary Limited was duly appointed as the
independent professional expert and has provided the Board with a fairness opinion
regarding the Early Settlement ("Fairness Opinion") in which they have advised the Board
that they believe that the terms thereof are fair to shareholders.
The Fairness Opinion will lie open for inspection at the registered office of Sibanye-
Stillwater located at Constantia Office Park, corner 14th Avenue & Hendrik Potgieter
Road, Bridgeview House, Ground Floor (Lakeview Avenue), Weltevreden Park, 1709, South
Africa, for a period of 28 days from the date of this announcement.
Investor relations contact:
Email: ir@sibanyestillwater.com
James Wellsted
Head of Investor Relations
+27 (0) 83 453 4014
Sponsor: J.P. Morgan Equities South Africa Proprietary Limited
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