Amplats sells Rustenburg operations to Sibanye

Yesterday we received news that, Anglo American Platinum Limited Announces The Sale Of Its Rustenburg Operations. The basics of the deal are that Sibanye will buy the asset for a minimum of R 4.5 billion and a maximum of R20 billion, with an upfront payment of R1.5 billion.

Why the range in the sales price? Sibanye will pay out 35% of the distributable free cash flow from the mines over six years. So if the platinum price goes up over the next few years the payouts will be higher and Amplats can go to their shareholders and say we didn't sell at the bottom. The current book value of the operations sits at R7.7 billion, so the sale price is below that but could be well above that depending what happens to the platinum price in the next few years.

I think this is a good deal for both parties, Sibanye got the asset at a good price and for Amplats they get to move out of the labour intensive area and focus more on mechanised mines. Sibanye have shown they have a great skill at operating labour intensive mines, if the platinum price doesn't drop further, they say there won't be any jobs on the line. A better operator means the mines are more profitable, which is a good thing for all the workers. Part of the deal is that Amplats will also be the ones refining the platinum coming out of the mines. The Sibanye share price is up 22% since the cautionary last week, Amplats is only up 0.7%, they were up around 5% for most of yesterday. You can see who the market thinks won in the deal but both stocks are up.

The deal will take place from the latter of either the 1 January 2017 or completion of the transaction, as you can see the parties don't expect things to move quickly due to all the hoops they are going to have to jump through.