Sibanye Gold Ltd., trading as Sibanye-Stillwater, agreed to exchange certain surface gold processing assets and tailings storage facilities for a 38% stake in DRDGold Ltd., the companies said Nov. 22.
DRDGold will issue 265 million shares to Sibanye-Stillwater, valuing the deal at 1.3 billion South African rand based on a DRDGold share price of 4.96 rand, with the deal expected to close in the second quarter of 2018.
Sibanye-Stillwater also has an option to buy more shares in DRDGold to reach a 50.1% shareholding during 24 months following completion of the transaction at a 10% discount to the 30-day volume-weighted-average-price of DRDGold shares.
The deal includes portions of the West Rand Tailings treatment project, gold dumps and tailings from Kloof and Driefontein as well as the Driefontein surface and pilot plants. The deal also includes the land required for a future centralized process plant and regional tailings storage facility.
The deal does not include the uranium tailings, which Sibanye-Stillwater is keeping along with facilities at the Cooke 4 shaft and plant to process uranium.
The assets host probable mineral reserves of 3.8 million ounces of gold and 42.9 million pounds of uranium.
The acquisition will increase DRDGold's gold reserves by about 92% to 5.75 million ounces of gold, with the surface assets capable of providing cash flows in the short term and lower initial CapEx requirement to support future growth and development of the project.
DRDGold plans to develop the new assets through a phased approach. In the first phase, it will upgrade the existing Driefontein 2 and 3 plants from their nameplate capacity of 315,000 tonnes per month to between 400,000 tpm and 600,000 tpm to process high-grade dumps and generate cash for low upfront CapEx.
"Phase 1 is expected to be cash generative with the minimal upfront capital investment required. These cash flows will be prioritized for the development of subsequent phases," DRDGold said.
The first phase must be completed within 24 months after closing the deal while commissioning is expected to take 12 months.
The second phase of DRDGold's plans includes the construction of a central processing plant capable of processing 1 million tonnes of material per month and building a new regional tailings storage facility and pipelines to transport material to and from the plant.
"Given the company's elevated leverage post-the Stillwater transaction and a more challenging business environment in South Africa which has seen Sibanye scale back on new capital investments in-country, we had not expected to see Sibanye progress the West Rand Tailings Retreatment Project in the near-term," RBC Capital Markets analysts wrote in a note to clients.
Overall, this creates value for a project that would not have progressed in the near-term, given the significant CapEx requirements for the development of a gold, uranium and sulfuric acid plant, the analysts noted.
