Fri, 15 Nov 2019

A Canadian company will pay Royal Bafokeng Platinum (RBPlat) R2.1bn in cash for the future delivery of gold output

On Wednesday, Royal Bafokeng Platinum announced the deal with Triple Flag Mining Finance Bermuda, a mining financier which has its headquarters in Canada. Triple Flag will pay more than R2bn ($145m) in cash upfront for the future delivery of gold from RBPlat mining operations

RBPlat will deliver 70% of its gold output to Triple Flag until 261,000 ounces are delivered, and then 42% of output thereafter. For every ounce, Triple Flag will pay 5% of the spot gold price to RBPlat.

Gold output represents only 3% of RBPlat's revenue and the deal will allow it to monetise a portion of this gold production at a time when the rand gold price is at a high, compared to prices over the past decade, the company said.

The money will be used to help settle a part of the R1.86bn deal it struck with Anglo American Platinum (Amplats) to buy its 33% stake in the Bafokeng Rasimone joint venture near Rustenburg.

In essence, the deal means that for the next three decades, RBP will have to deliver gold - which is currently trading above $1,400 an ounce - to Triple flag at an estimated $555 an ounce, says Gryphon Asset Management portfolio manager Casparus Treurnicht.

"That may sound low, but RBPlat clearly doesn't want to let the opportunity slip of capitalising on high gold prices. They are also keen to get the cash now to settle the deal with Amplats."

Treurnicht says the deal has had a painful impact on RBPlat's finances: its total finance costs in the six months to end-June rocketed to R263m from R7.2m a year before. The Triple Flag deal will help settle its debts.

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