Highlights
- Appian has served Sibanye-Stillwater with a Notice of Claim for the unlawful failure to close on the acquisition of Atlantic Nickel and Mineração Vale Verde resulting in lost purchase consideration worth over US$1.2 billion
- Sibanye-Stillwater incorrectly stated that a geotechnical instability at the Santa Rita mine constitutes a material and adverse event
- In reality, the instability had minimal impact on the mine and these types of occurrences are expected in mature mining operations
- Affected less than 1% of the total surface area of the open pit mine and two days later, daily ore mined exceeded pre-event levels
- There is no impact on open pit mine life and no expected loss of ore within the open pit Reserve
- Area will be fully mined out by early H2 2022, at which point the instability no longer exists
- Appian believes Sibanye-Stillwater’s actions have greatly exaggerated the effect of the geotechnical instability and have materially damaged the market perception of Atlantic Nickel and Appian
- Appian intends to rigorously enforce its legal rights and pursue Sibanye-Stillwater for all damages and losses incurred
On February 16, 2022, funds sponsored by Appian Capital Advisory LLP (“Appian” or the “Company”) served Sibanye-Stillwater Limited and its subsidiary Sibanye BM Brazil (Pty) Ltd (together, “Sibanye”) with a Notice of Claim seeking compensation for Sibanye’s unlawful failure to close on a transaction worth over US$1.2 billion in purchase consideration (consisting of US$1 billion in cash and a royalty valued by Sibanye at US$218 million) along with other associated material breaches. The transaction relates to two sale and purchase agreements (“SPAs”) pursuant to which Sibanye had committed to acquire both Atlantic Nickel (the owner of the Santa Rita nickel mine) and Mineração Vale Verde (the owner of the Serrote copper mine). All conditions to closing under the SPAs had been satisfied, and Appian will assert its legal rights and intends to seek compensation from Sibanye in full.
To justify its termination, Sibanye incorrectly stated, both to Appian and the public, that a material and adverse event had occurred at the Santa Rita mine. Appian believes this characterization is false, damaging and defamatory. In reality, the geotechnical event relied upon by Sibanye is a localized instability that has little impact on the productivity of the mine.
At no point before Sibanye’s press release had it ever asserted that the geotechnical instability was a material adverse event. In fact, the Sibanye team, led by its Chief Technical Officer, visited the Santa Rita mine in mid-November of 2021, a week after the geotechnical instability occurred, and concluded that the risk of such an instability is “to be anticipated in mature mining operations.” This assessment was correct, and nothing has occurred since then that would warrant any revision of that view. Appian has requested the geotechnical analysis performed by Sibanye or their advisors to justify termination of the SPAs but has yet to receive it. This has led Appian to believe that Sibanye’s claim that the instability constituted a material adverse event was an excuse not to comply with its legal obligations.
Appian takes the safety of its operations very seriously, which is evidenced by Atlantic Nickel’s Lost Time Injury Frequency Rate in 2021 of 0.20.
Sibanye’s assertions in the press that the instability reduces a 6-year mine life by 2 to 3 years are highly damaging and clearly unsupportable. To help set the record straight, the points below help to demonstrate the immateriality of the instability:
- The purported material adverse event was, in fact, a crack that formed a wedge-shaped rock mass
- The instability directly affects <1% of the pit wall’s total surface area
- Less than two days later, ore mining activity at Santa Rita exceeded pre-event levels
- There is no impact on open pit mine life; there is no expected loss of ore within the open pit Reserve
- A pushback designed to remediate the area requires mining 2.6 Mt of additional waste over life of mine, reflecting:
- a < 2% increase in the total material to be mined during the remaining open pit mine life, which is over 140 Mt
- a < 1% increase in the total material to be mined during Santa Rita’s full 34-year mine life, which is over 280 Mt
- The pushback increases the life of mine strip ratio (the ratio of waste to ore) from 2.52x to 2.58x
- Applying Atlantic Nickel’s actual mining costs in 2021 of US$2.57/t mined, the additional 2.6 Mt of material would only represent US$6.7m in additional mining costs over the entire open pit mine life
- For context, Atlantic Nickel generated US$127m of EBITDA in 2021 alone
- 13.4% of the pushback had been mined by February 4, 2022; completion is expected by early H2 2022 at which point the instability no longer exists
Sibanye purports to rely upon alleged adverse impacts of this geotechnical instability to terminate the SPAs.
Appian believes that, in reality, Sibanye intentionally chose to breach its obligations for commercial reasons alone. Appian intends to rigorously enforce its legal rights and pursue Sibanye for all damages and losses incurred.
Further background and visual evidence of the geotechnical instability is provided below.
On November 9, 2021, a wedge-shaped geotechnical instability formed in the vicinity of Phase 5. Figure 1 shows the location of the instability in the open pit. To put the size of the instability in context, the surface area directly impacted by the instability makes up less than 1% of the total surface area of the pit walls.
Figure 1 | Location of the geotechnical event in relation to current pit topography
The initial event consisted of the propagation of a crack forming a wedge in the pit wall. This was accompanied by a slumping, vertical displacement of only around 1.5 – 2.0 meters. As a precaution, mining was temporarily suspended in the affected area and constant 24/7 radar monitoring established. No safety related incidents occurred related to the event or otherwise. No runout of material occurred. Subsequent radar monitoring of the instability indicates that less than 20 millimeters of movement has occurred since. Figure 2 shows an image of the affected area before and after the formation of the geotechnical instability, showing almost no visual change.
By November 11, the daily amount of ore mined exceeded pre-event levels.
Figure 2 | Before and after the formation of the instability – almost no visual change
The stability of both the affected area as well as the design of a pushback to remediate it has since been evaluated by third-party geotechnical experts. The pushback mines 4.7 Mt of waste material, only 2.6 Mt of which falls outside of the final design pit limit. Aside from impacts to the mine schedule, which is normally reviewed on an annual basis, the 2.6 Mt of waste will add to the total material to be mined during the remaining open pit mine life. Prior to the event, over 140 Mt of open pit material remained to be mined, and so the additional material equates to a less than 2% increase. With the underground extension, the increase is less than 1% of total material mined. There is no expected impact from the event on the life of mine open pit Reserve.
Mining of the pushback commenced in December and is expected to be complete in early H2 2022. Figure 3 shows that by early January, the top three benches of the wedge had already been mined out.
Figure 3 | Pushback progress
For further information:
Finsbury Glover Hering +44 (0)20 7251 3801 / [email protected]
Charles O’Brien, Richard Crowley, Theo Davies-Lewis
Appian Capital Advisory +44 (0)20 7004 0951 / [email protected]
About Appian Capital Advisory LLP
Appian Capital Advisory LLP is the investment advisor to long-term value focused private equity funds that invest solely in mining and mining related companies.
Appian is a leading investment advisor in the metals and mining industry, with global experience across South America, North America, Australia and Africa and a successful track record of supporting companies to achieve their development targets, with a global operating portfolio overseeing nearly 5,000 employees.
Appian has a global team of 54 experienced professionals with presences in London, Toronto, Lima, Belo Horizonte, Montreal and Sydney.
