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Sibanye-Stillwater faces court battle for ditching $1.2bn Brazil mines deal

Serrote copper project in Brazil. (Image courtesy of Mineração Vale Verde.)

Appian Capital Advisory is taking Sibanye-Stillwater (JSE: SSW) (NYSE: SBSW) to the High Court in London over the South African miner’s decision to ditch a multi-million deal to acquire nickel and copper mines in Brazil.

The British investment firm, advising two affiliated private equity funds which own the Santa Rita nickel and Serrote copper mines in Brazil, said the transaction was worth over $1.2 billion and called Sibanye’s failure to close on it “unlawful.”

Sibanye-Stillwater agreed to buy the two assets in October 2021, in a bet to boost its growing battery metals portfolio, while diversifying away from platinum and gold.

The company suddenly cancelled the deal early this year, citing a “geotechnical event” at the Santa Rita mine in north-eastern Brazil. Sibanye, which reported strong profits and a 20% increase in South African platinum group metals (PGM) production for 2021, said the issue at Santa Rita would have had a material and adverse impact on operations.

Appian, however, has said the instability quoted by the precious metals miner was a “localized” crack in the mine’s pit wall, which has had and would have no impact on the open-pit mine’s life.

The fund claims that Sibanye’s chief technical officer visited Santa Rita a week after the “geotechnical instability” occurred and concluded in a site report that it was an event “to be anticipated in mature mining operations.”

Sibanye had planned to release 2021 operating and financial results on February 17, but it delayed the publication to March 3. It noted in a separate statement that completing the report had taken longer than planned, partly due to Appian’s “apparent effort” to disrupt the announcement and to “engage in litigation” via the media.

Internal talks

Sibanye-Stillwater is also negotiating with unions over wages at its South African gold operations, but has yet to reach an agreement with organized labour representatives.

While talks with three unions are underway, the Solidarity union split from the rest this week by announcing it accepted Sibanye’s final wage offer of a 5% annual pay increase.

The company has been aggressively expanding into battery metals, with a string of deals announced last year.

Analysts believe the miner faces the risk of paying premiums for assets that can replace the dumped Brazilian mines as battery metals prices are hovering around record highs.

“Given where nickel, copper and lithium prices sit today, it’s going to be a lot more difficult to find cheaper assets,” Mandi Dungwa, an analyst at Kagiso Asset Management in Cape Town, said in January. “Clearly those metals are worth a whole lot more given where we are in commodities prices than two years ago.”

Nickel’s usage has grown over the past two years in lithium-ion batteries. The accelerated roll-out of EVs is making certain types of the metal popular among investors, as it can be processed into battery precursor materials.  

The more traditional use of nickel is in the processing of stainless steel for appliances and utensils.   

Shortages of copper, cobalt, nickel and other industrial materials needed for the shift to a low carbon world are expected, partly due to underinvestment in the mining sector and accelerating demand of those metals.