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After initiating the deal in November of last year, Sibanye has officially acquired a 38.05-percent stake in DRDGOLD. It will unlock the value of the company’s under-utilized surface infrastructure.
Sibanye-Stillwater (NYSE:SBGL,JSE:SGL) officially owns 38.05 percent of the issued share capital of DRDGold (NYSE:DRD,JSE:DRD), which is currently worth R895.7-million, Sibanye announced on Wednesday (Aug 1).
As per the agreement, which was entered into on November 22, 2017, Sibanye agreed to exchange selected surface gold-processing assets and tailing storage facilities (TSFs) for shares in DRDGold. More specifically, Sibanye invested into DRDGold’s West Rand Tailings Retreatment project (WRTRP).
“We are excited about the partnership with DRDGOLD which unlocks value for our under-utilized surface infrastructure and TSFs, while retaining upside to the West Rand Tailings Retreatment project and future growth in DRDGOLD,” said Neal Froneman, CEO of Sibanye.
“Further value will be derived from the future development of this long life surface reclamation project, which will benefit all of our stakeholders, particularly those in the region,” he added.
Additionally, as per terms of the acquisition, Sibanye has an option to subscribe for the option shares within 24 months in order to further attain up to a 50.1-percent shareholding in DRDGOLD.
The shareholdings would be at a 10-percent discount to the 30-day volume weighted average traded price of a DRDGOLD share on the day prior to the date of exercise of the option.
For its part, DRDGOLD noted that the deal is pertinent to its growth strategy, as it will increase the company’s gold reserves by 90 percent.
“The way is now clear for us to expedite Phase 1 of our phased plan for the development of WRTRP, to be known going forward as Far West Gold Recoveries,” said Niël Pretorius, CEO of DRDGOLD.
When addressing phase 1, Pretorius noted, “[p]hase 1 involves the upgrading of the Driefontein 2 plant to process tailings from the Driefontein 5 dump at a rate of between 400,000 and 600,000 tonnes per meter and depositing the residue on the Driefontein 4 tailings dam.”
Additionally, DRDGold has secured a R300-million revolving credit facility from a South African financial institution for phase 1.
The company has also stated, “[DRDGOLD] confirmed orders for most of the long lead items, and expect to be in production in the first quarter of calendar year 2019.”
As of 1:01 p.m. EST, Sibanye was up 0.40 percent, trading at US$2.53. Meanwhile, DRDGOLD was down 1.75 percent, trading at US$2.53.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.
