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Sibanye-Stillwater and DRDGOLD execute R1.3 billion gold deal

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Global Mining Review,

South African gold producer, Sibanye-Stillwater, has entered a partnership with South African gold retreatment company, DRDGOLD Ltd, in which the company will exchange certain surface gold resources and tailings storage facilities in return for a 38% stake in DRDGold Ltd.

This will result in Sibanye-Stillwater obtaining 265 million newly issued DRDGOLD shares. At the current DRDGOLD share price of R4.96, this equates to R1.3 billion of crystallised value. The transaction excludes the Cooke uranium and gold assets which comprise: the Cooke TSF, Millsite TSF and the Cooke surface gold plant as well as the Ezulwini gold and uranium plant and associated Ezulwini 4 TSF. The Cooke and Ezulwini TSFs contain Probable gold Reserves of 2.401 million oz and probable uranium reserves of 54.26 million lbs. Sibanye-Stillwater retains full ownership of these assets and the right to process and deposit this material onto the RTSF, subject to contributing their proportionate capital and operating costs. As such, Sibanye-Stillwater retains full exposure to a higher uranium price environment.

Sibanye-Stillwater and DRDGOLD have simultaneously entered into an option agreement in which Sibanye-Stillwater will have the option to subscribe for a sufficient number of DRDGOLD ordinary shares to attain a 50.1% shareholding in DRDGOLD for up to 24 months post completion of the transaction. The option has to be exercised in whole, anytime within the option period. Stillwater retains full exposure to a higher uranium price environment.

The subscription price for the option shares shall be at a 10% discount to the 30-day volume weighted average traded price of DRDGOLD shares on the day prior to the date of exercise. Stillwater retains full exposure to a higher uranium price environment.

The transaction allows Sibanye-Stillwater to immediately crystallise R1.3 billion in value from the selected assets, while partnering with DRDGOLD to further develop the WRTRP. Furthermore, this partnership presents an opportunity in an exciting mining segment to leverage off DRDGOLD’s proven surface retreatment capabilities with the potential to capitalise on further growth opportunities both locally and abroad.

Neal Froneman, CEO of Sibanye-Stillwater, said: “We are excited about the inherent potential in the investment and look forward to partnering with DRDGOLD in growing an international, industry leading, surface retreatment business. Sibanye-Stillwater will realise immediate value for under-utilised surface infrastructure and TSFs, while retaining upside to the West Rand Tailings Retreatment project and future growth in DRDGOLD. Our stakeholders in the region also stand to benefit from the future development of this long-life surface reclamation project”. DRDGOLD has a network of surface assets which is unrivalled in South Africa and is focussed on optimising these assets in order to increase gold production and extend its operational life. DRDGOLD intends to develop the selected assets through a phased approach. The first phase will include upgrading the existing Driefontein 2 and 3 plants to process tailings from the high-grade Driefontein 5 TSF. Phase 1 must be completed within 24 months after the closing of the transaction while commissioning is expected to take 12 months and will include:

  •  Construction and upgrading of relevant pump stations and slurry pipelines and associated process water pump station and pipeline.
  •  Upgrading of the Driefontein 2 and 3 plants from their name plate capacity of 315 000 tpm to between 400 000 to 600 000 tpm for processing of higher tailings volumes.
  •  Potential upgrading of the Driefontein 4 TSF for additional tailings storage capacity.
  • ? Refurbishment of conventional carbon in leach treatment plants (DP2&DP3).
  • Further evaluation of all the TSFs through the pilot plant located at DP3 will take place within 24 months. The evaluation of each resource will include:
  • ? Bulk samples to be trucked to DP3 plant for evaluation. CIL, milling, flotation and concentrate leaching.
  • Blending of various resources to determine the optimal combination and ratio.

Phase 1 is expected to be cash generative with minimal upfront capital investment required. These cash flows will be prioritised for the development of subsequent phases. Outputs from Phase 1 will enable DRDGOLD to refine the original WRTRP process and engineering design as well as financial and capital models for Phase 2.

Phase 2 will deliver a central, high-volume, CPP capable of processing at least 1 million tpm of tailings and development of a new RTSF including associated pipeline infrastructure, within an additional 24-month period.

The implementation of the transaction is both subject to, and conditional on, the fulfilment of conditions precedent customary for a transaction of this nature.

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