Anglo American Platinum announces that Rustenburg Platinum Mines Limited (“RPM”), a wholly owned subsidiary of the Company, has entered into a Sale and Purchase Agreement (“SPA”) to sell its 85% interest in Union Mine and its 50.1% interest in MASA Chrome Company Proprietary Limited (“MASA Chrome”) (together, the “Disposal Assets”) to a subsidiary of Siyanda Resources Proprietary Limited (“Siyanda”) (“the Transaction”). Anglo American Platinum will retain the Mortimer smelter operation.
Description of the Disposal Assets
Union Mine and MASA Chrome are located in both the Limpopo and North West provinces of South Africa and Union Mine operates under a mining right covering an area of 119 square kilometres.
Under the terms of the SPA, the Transaction consideration comprises an initial disposal consideration of R400 million, payable in cash, as well as a deferred consideration based on 35% of cumulative positive distributable free cash flow paid annually as an earn-out, for a period of ten years from the effective date of the Transaction, which deferred consideration has a cap of R6 billion. The maximum Transaction consideration receivable by the Company is therefore R6.4 billion. Anglo American Platinum has no obligation to contribute towards any negative cash flow that may be generated by the Disposal Assets. Anglo American Platinum intends to use the Transaction consideration proceeds to reduce debt.
Chris Griffith, CEO of Anglo American Platinum, commented on the Transaction:
“We are pleased to deliver another important milestone in the strategic repositioning of Anglo American Platinum’s portfolio. The Union Mine and Masa Chrome operations are quality assets that I believe have long-term and sustainable potential under Siyanda’s ownership. This Transaction is beneficial for both parties, whilst also creating a sustainable future for the operation.”
Purchase and Toll Treatment of Concentrate
Siyanda will sell concentrate produced by the Union Mine to Anglo American Platinum for a period of seven years from the effective date of the Transaction on pre-agreed commercial terms and thereafter Anglo American Platinum will toll treat concentrate for the remaining life of Union Mine. The charge payable by Siyanda under the toll treatment arrangement will reflect smelting and refining costs as well as an economic return on the proportional share of the capital base that Anglo American Platinum has invested in its processing assets.
Conditions precedent and effective date
The Transaction is subject to the fulfilment or waiver (where capable of waiver) of the following conditions precedent by no later than the long-stop date of 30 June 2018:
- the granting of the Section 11 consent from the Department of Mineral Resources (DMR);
- the approval of the Transaction by the competition authorities of the Republic of South Africa;
- the conclusion of Siyanda’s BEE structure; and,
- the conclusion of various ancillary agreements required for implementation of the Transaction.
The Transaction is expected to complete during the second half of 2017.
Rationale for the Transaction
In January 2013, Anglo American Platinum announced its intention to reconfigure, and thereafter exit the Disposal Assets. Since then, significant restructuring has been delivered at Union, including combining North and South Mines into a single operation and placing North declines, South declines and the Mortimer Merensky concentrator on care and maintenance. Operational improvements have also had a significantly positive effect on Union Mine’s cost position and cash generation. The Company, however, has more value accretive capital options in its portfolio and would not prioritise capital investment into the Disposal Assets, and is therefore not the best owner of these assets.
The sale of Union Mine and MASA Chrome advances the Company’s repositioning to focus on its most competitive assets, consisting of largely open pit and mechanised operations which will deliver higher margin production, a more highly skilled workforce, safer operations and a less complex organisation.
Value of the net assets and profits attributable to the net assets
As at the Company’s year ended 31 December 2016, the value of the net assets pertaining to the Disposal Assets was R1,654 million. The profits attributable to the Disposal Assets is not separately disclosed recognising the nature of the Company’s smelting and refining activities.
Categorisation of the Transaction
The Transaction constitutes a Category 2 disposal for the Company and, as such, no shareholder approval is required.
Johannesburg, South Africa
15 February 2017
RAND MERCHANT BANK (A division of FirstRand Bank Limited)