Sibanye Secures US$500-million Gold-Palladium Streaming Deal

Sibanye-Stillwater (NYSE:SBGL) will receive a US$500-million upfront cash payment through a streaming agreement with a subsidiary of Wheaton Precious Metals (TSX:WPM,NYSE:WPM). 

In a Monday (July 16) press release, Sibanye said it will deliver a percentage of gold and palladium produced from its platinum-group metals (PGMs) operations in the US in exchange for the funds. The precious metals will mainly be extracted from Sibanye’s Stillwater and East Boulder operations.

“The streaming transaction is further delivery on our strategic commitments and validates the value we identified in the Stillwater assets,” said Neal Froneman, Sibanye’s CEO.

“Importantly the transaction results in a significant reduction in group leverage, improving flexibility and reducing financing costs and risk. We are extremely pleased to have secured this competitively priced financing arrangement with a company of the quality of Wheaton International,” he added.

Sibanye says the deal is of minimal risk as the stream is set up so that the company only needs to deliver a percentage of actual production, without ever being obligated to repay of the $500 million under any circumstances, and without minimum deliveries.

The deal does state that the company must sell all of the gold produced at its East Boulder and Stillwater mines to Wheaton for as long as the mines are operational.

Additionally, Wheaton will receive a percentage of the palladium produced at the mines, with the amount being staggered based on certain milestones; it will move from 4.5 percent to 2.5 percent and then to 1 percent for the life of the mines.

For its part, Wheaton will pay Sibanye 18 percent of the market prices for palladium and gold for each ounce of metal delivered up to the advanced amount, after which it will pay 22 percent.

“The stream includes a completion test on the development of the Blitz Project, including completion of underground development, critical surface infrastructure and expansion of the concentrator production output,” Sibanye said in a press release.

Gold production over the life-of-mine plan represents about 43 percent of the stream value, while palladium contributes the remaining 57 percent. Platinum is excluded from the deal. 

“Stillwater is another accretive addition to Wheaton’s portfolio of assets that is expected to contribute both production and cash flow for decades,” said Wheaton President and CEO Randy Smallwood.

At close of day on Tuesday (July 17), Sibanye was trading at US$2.38, up 2.15 percent.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.