SIBANYE-Stillwater’s agreement with Glencore-Merafe Joint Venture (GMV) announced today is designed to generate billions of rands in by-product chrome revenues for the Johannesburg miner.
In a two part deal, the agreement will first accelerate delivery of chrome volumes in terms of the long-standing Marikana Contract (MC) which was signed between the GMV and Lonmin, the previous owner of the Marikana operations in 2011. Lonmin nearly went bust until it was bought by Sibanye-Stillwater in 2019.
In terms of the original Lonmin MC, the chrome volumes contractually required to be delivered would not be satisfied before 2060.
Today’s agreement allows for an acceleration of contractually required chrome production from Marikana, such the contract is satisfied by about 2033.
In order to achieve this Sibanye-Stillwater will allow the Merafe-Glencore JV to increase production from chrome recovery plants (CRPs) at Marikana, including the mothballed Roland CRP and the K4 CRP.
After 2033, legacy MC will fall away and the Sibanye-Stillwater will participate in a much greater share of chrome value from the Marikana CRPs.
The second part of the agreement, contained in a new Chrome Management Agreement (MCA), will see the Glencore-Merafe JV also take over management of Sibanye-Stillwater’s CRPs at its Kroondal and Rustenburg PGM mines, which will fall under the beneficial terms of the MCA and benefit from cost synergies and improved volumes and recoveries due to GMV’s technical expertise in chrome recovery.
The improvement in the chrome price has significantly supported revenues for the PGM producers at a time when the price of palladium and rhodium have flagged.
Based on the first half of its 2024 financial year, by-product credits from Sibanye-Stillwater’s PGM operations increased 16% to R5.9bn. This was primarily due to a 42% increase in the value of chrome sold to R3.1bn which was 53% of the value of by-product credits.
Revenue from Sibanye-Stillwater’s South African PGM operations for the period was R26.6bn, with chrome comprising 12% of total revenue.
Prior to the agreement with the Glencore Merafe JV, chrome production from Sibanye-Stillwater was forecast to peak to just over 2.5 million tons this year before falling to 1.5Mt by 2029. The enhanced value arising from this agreement will enable investment in ongoing chrome production, as well as underpin the value of possible future development projects which are being assessed.
“We are excited about the continued relationship with the Glencore Merafe Venture,” said Neal Froneman, CEO of Sibanye-Stillwater.
“We expect the CMA to immediately enhance cash flow from the South African PGM operations and by leveraging potential operational synergies and reducing costs, deliver substantial value over the longer term,” he said.
