SIBANYE Gold has continued its aggressive growth, launching a R407m cash bid for Wits Gold to get its hands on deposits in the Free State to extend the life of its Beatrix mine and to give it its first asset on the East Rand.
Sibanye, formed out of the unbundling of three deep-level gold mines by Gold Fields, has tied up large swathes of the West Rand, buying the four Cooke shafts and enormous gold and uranium-rich tailings near Randfontein from Gold One.
Further, Sibanye has done a land swap with Harmony Gold’s Joel mine and the Beatrix mine in the Free State.
The gold miner has now launched a bid for the cash-strapped Wits Gold exploration company that will give it a sizeable land holding in the Free State and access to the newly built Burnstone mine in Mpumalanga, which Wits is buying from the liquidators of Great Basin Gold.
Sibanye will pick up the funding of up to R950m to bring the Burnstone mine into production of about 100,000oz a year.
Sibanye is transforming itself from a company with deep-level, expensive gold mines to one with much shallower resources and is cementing its place as South Africa ’s largest gold producer.
The all-cash offer of R11.55 per share is a 47% premium to the 30-day average price of Wits Gold, which is trading towards the bottom end of a 52-week range.
Wits shareholders have seen a big reversal in the value of their holdings. Four years ago, the share traded at around R90.
The shares jumped 30% on Wednesday to R10.70.
Irrevocable support for the offer from Sibanye has been secured from holders of 56% of the 34-million shares in issue, including Adam Fleming, founder and chairman of the company, who owns 25%. Support from holders of 75% of Wits is needed for the transaction to go ahead.
“We are in difficult times now, if you look at where the markets have been for the past year,” said Wits CEO Philip Kotze, who has been trying to raise capital for the De Bron Merriespruit project in the Free State. “There’s not a lot of capital around.
“You could have asked three months ago if we were bottom of the market and we would have said yes we were, but it’s continued to fall further. It’s important for us to get certainty for our shareholders and to take the money when it’s on the table .”
Wits would have had to come to the market in the second quarter of the next year, having depleted the cash within the business. It was hard to raise capital without a mine in or close to production.
One of the options was for Wits to raise a large sum of money towards the De Bron project, but it would have been massively dilutive for shareholders and expensive for debt.
Mr Kotze said negotiations with Sibanye CEO Neal Froneman had been under way for quite some time. Also, Wits is in talks with Harmony on a land swap.
Harmony would give Wits land around the Bloemhoek property owned by Wits, which abuts Sibanye’s Beatrix mine. In exchange, Wits would hand over land it held near Harmony’s Kusasalethu mine.
“As the gold industry, our backs are so firmly against the wall that we need to come up with smart decisions,” Mr Kotze said.
“(We) are trying to find better ways of doing things and the logical swaps and transactions are starting to happen.”
In the Free State, Sibanye has largely tied up the southern portion of the gold belt with Beatrix as the vital piece in the puzzle, with its processing plant and its four shafts set to unlock unmined gold resources.
Mr Froneman estimated a million ounces could be readily mined from Beatrix’s assets, while it will develop the De Bron project in the future on a smaller scale than that planned by Wits. De Bron lies to the east of Beatrix and Bloemhoek and is separated from these by a large fault.
The last piece in the consolidation puzzle is Harmony’s Joel mine. Mr Froneman said this was a low-cost producer in Harmony and it would be “an expensive acquisition and it’s not in any discussions at the moment”.
The purchase of the Free State assets will give Sibanye two large uranium deposits, one of which can be mined from its Four shaft at Beatrix. In time, Sibanye’s uranium assets could be separately listed, Mr Froneman said.