Tue. May 24th, 2022

A high-profile mining deal that would generate a nearly billion-dollar windfall for a London private equity group has been called into question after the buyer tried to withdraw from the deal.

Sibanye-Stillwater, one of South Africa’s largest miners, said he had the $ 1 billion acquisition of Atlantic Nickel of Appian Capital Advisory following a “geotechnical event” at the Santa Rita mine in Bahia, northeast of Brazil.

“The Company has assessed the event and its effects and has concluded that it would be material and adverse to the business, financial condition, results of operations, the properties, assets, liabilities or operations of Santa Rita and would be adverse. , ”Sibanye said.

That view was immediately disputed by Appian, who said there was no basis for Sibanye to “legally terminate” the acquisition of Atlantic Nickel and a smaller copper asset, Mineração Vale Verde.

The geotechnical event to which Sibanye refers is said to be a “localized rupture” that occurs in the normal course of open pit mining and does not constitute a “material adverse event” clause, which allows it to run away from the transaction. .

“To rectify the condition of the area in question, some additional waste will have to be mined earlier in the mining plan, which is equivalent to less than 1 percent of the mine’s volume over a 34-year mining life,” he said. that said. . “Appian is currently reviewing all of its legal options and will take all necessary steps to enforce its legal rights.”

Shares in Sibanye, which is listed in Johannesburg, fell almost 7 percent to R5 469. The company has a market value of $ 10.5 billion.

“We have previously considered that this transaction has major strategic and valuation implications for Sibanye, which has turned it away from a pure precious metal company to a base metal profile,” said Dominic O’Kane, analyst at JPMorgan.

Since 2016, Sibanye has transformed itself from a high-cost South African-focused gold miner to one of the world’s largest producers of platinum, palladium and rhodium through a series of transactions.

The Atlantic Nickel deal, announced in October, was seen as an important part of the company’s strategy to expand into electrifying metals and followed the acquisition of a 50 per cent stake in a Nevada lithium mine for $ 490m.

At the time, Sibanye CEO Neal Froneman described the acquisition of Atlantic Nickel as a “significant additional step” in its transition to a “climate-resistant enterprise”.

It has averted competition from major miners and automakers to win the race for a company that operates one of the world’s largest open pit nickel sulphide mines. It agreed to a $ 1 billion cash prize plus a stream of future royalty payments for Santa Rita and MVV.

For Appian in London, the deal was a confirmation of its “hands on” approach to investment and garnered praise from the industry – in December it was named ‘Mining Deal of the Year’ at Mines and Money, a leading mining summit.

Appian, led by former JPMorgan banker Michael Serb, acquired Atlantic Nickel from a complex bankruptcy lawsuit in 2018 for only $ 68 million. It has invested a further $ 50 million in the redesign of the Santa Rita mine and resumed operations in January 2020.

Nickel is used in many of the cathodes used in lithium-ion batteries used by most electric car manufacturers. Sulfide ore is best suited for the task, but increasingly difficult to find.

“Santa Rita is expected to have strong operational and financial performance in 2022 and generate significant free cash flow,” Appian said.

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