Sibanye Gold Ltd., which trades as Sibanye-Stillwater, exercised an option to subscribe for ordinary shares in DRDGold Ltd., increasing its shareholding from 38.05% to 50.1%, after its initial shareholding in the company increased 147% in value over the last 17 months.
Sibanye CEO Neal Froneman said in a statement Jan. 10 that by securing the DRDGold stake, Sibanye is increasing value for stakeholders, adding that the DRDGold team has a proven track record in implementing the Far West Gold Recoveries project and reaching its 500,000-tonne-per-month planned phase one capacity.
Froneman said the company looks forward to additional value creation as DRDGold completes its planning and starts phase two.
Sibanye will subscribe for 168,158,944 shares at an aggregate subscription price of 1.09 billion South African rand Jan. 22. The shares will be allotted and issued at 6.46 South African rand per share, a 10% discount to the 30-day volume-weighted average traded price of DRDGold's shares on the Johannesburg Stock Exchange the day prior to the date of exercise of the option.
In November 2017, DRDGold agreed to acquire the gold assets of Sibanye-Stillwater's West Rand Tailings Retreatment Project, now known as Far West Gold Recoveries, in return for a 38.1% stake in DRDGold. Sibanye-Stillwater had an option to acquire an additional 12%, which it has now exercised.
DRDGold CEO Niel Pretorius said Sibanye-Stillwater had been invaluable in implementing the phase one development of Far West Gold Recoveries. He said the investment would help unlock additional value in DRDGold's business and fund the early development of phase two of the project.
Nedbank mining analyst Arnold van Graan said, "We expected Sibanye to do it, the original deal was completed some time ago, but there was some uncertainty as to how Sibanye would fund it."
"The increase in commodity prices and Sibanye's increased cash flow would have resolved that problem," he said in an interview.
Van Graan said the deal would allow for further cooperation between the companies. "Sibanye's surface operations could be blended into DRDGold's and funding will be made available for the next phase of the project," he said, adding that DRDGold lacked scale and technical knowledge and this was another area where Sibanye could assist. "The deal will mean more value for shareholders."
Production from DRDGold's two operations, Ergo and Far West Gold Recoveries, was 96,452 ounces for the second half of 2019, heading for the higher end of its guidance of 190,000 ounces for the year ending June 30, according to a statement released Jan. 10.