Union Mine sale good for transformation

As part of Anglo American's strategy to dispose of some of its noncore assets, subsidiary Amplats this week announced the long-awaited sale of its Union Mine and MASA Chrome stake to Siyanda Resources, a black-owned mining company.

Observers have been vocal about the group's asset sales benefiting empowered miners in South Africa .

Siyanda Resources had been doing business with Amplats since 2006. Amplats CEO Chris Griffith said Siyanda was a partner Amplats could do business with whether it was black or not. It knew Union Mine well.

"It's a really good company that we have faith in to actually deliver and keep this mine sustainable. Is it great? I think it's a great story for transformation, so we are very proud of that," Griffith said.

story_article_left1

Making sure empowered miners were considered in the group's asset sales was always part of the disposal process - to see how it could improve transformation.

Last month, Bloomberg reported that Anglo American shortlisted companies bidding for its coal assets, among which were companies led by Mike Teke, president of South Africa's Chamber of Mines, Phuthuma Nhleko, chairman of the Phembani Group and former CEO of MTN Group, and Sandile Zungu, executive chairman of Zungu Investments.

Union Mine has been for sale since 2013, but the company had to undergo restructuring to reposition the asset into a positive cash-generative business.

In 2013, Amplats consolidated the mine, initially divided into Union North and Union South, and in 2014-15 it closed the unprofitable parts of the mine. Then finally in 2016 it cut the labour force and production.

This week, Amplats announced that in its 2016 financial year Union Mine production was 151,000 ounces, 7% higher than the previous year's, while Rustenburg Mines, which was being sold to gold miner Sibanye, was down 4% due to safety stoppages after four deaths at the mine. The deal with Sibanye is now finalised.

Imraan Osman, director of business development at Siyanda Resources, said Union was a world-class platinum resource of more than 47million ounces.

Despite operational difficulties, Siyanda would continue to generate positive cash flows from Union, complementing its portfolio of assets and unlocking further net enterprise value.

story_article_right2

Paul Miller, an investment banker at Nedbank, said whether the deal was done on a commercial or empowerment basis, Siyanda Resources was a good fit. It was an established business and already in partnership with Amplats with the Chrome business and Union.

It obviously advanced empowerment and provided opportunities for transformation because it was a black-owned business, "but maybe it's about going beyond compliance because they would argue that they were fully compliant through [many BEE deals]".

Siyanda Resources will pay Amplats R400-million upfront for Union Mine and then make annual payments of 35% of cumulative free cash flows over 10 years, with a R6-billion cap on the price, meaning the sale value is R6.4-billion if platinum prices strengthen.

Amplats is still to exit some of its joint ventures, which include Atlasta Bokoni operations and the joint venture it has with Sibanye at Kroondal mine.