South African group’s $1bn deal with Appian expands footprint in energy transition commodities

South African company Sibanye-Stillwater saw off competition from major miners and carmakers to acquire a Brazilian nickel deposit and a copper and gold mine, as it seeks further diversification in energy transition commodities.

The $1bn purchase of Atlantic Nickel and Mineração Vale Verde from London-based Appian Capital is Sibanye’s fourth deal this year in battery metals and follows September’s purchase of a 50 per cent stake in a Nevada lithium mine for $490m.

Sibanye’s chief executive Neal Froneman said the deal was a “significant additional step” in its transition into a “climate change resilient business”.

It comes as miners try to increase their exposure to metals including copper, nickel and cobalt that will be needed as the world shifts to renewable energy and transport is electrified. BHP, the world’s biggest miner, is in a bidding war with Australian mining billionaire Andrew Forrest for a nickel project in Canada, while South32 has bid more than $2bn for a 45 per cent stake in Sierra Gorda, a copper project in Chile.

“We think this transaction has major strategic and valuation implications, pivoting Sibanye away from being a purely precious metals company towards a base metals profile,” said JPMogan analyst Dominic O’Kane.

Michael Scherb, founder and chief executive of Appian, said the auction for its two Brazilian assets had been very competitive and included large miners as well as two carmakers, which he declined to name.

“They were actually bidding, which was fascinating. I think that is a story in itself,” said Scherb. “It shows upstream security of supply is a major concern for industrial players.” London-based Appian acquired Atlantic Nickel, which owns one of the largest open pit nickel sulphide mines in the world, out of a complex bankruptcy process in 2018 for just $68m.

Appian invested a further $50m on redesigning the Santa Rita mine and restarted operations in January 2020. Nickel is used in the cathodes that go into lithium-ion batteries used by most electric car makers and sulphide ores are best suited for the task but increasingly difficult to find.

“The reason why are successful is that we are not just a financial investor,” said Scherb. “We are very hands-on. We run the operations ourselves. That’s how we were able to . . . bring both mines into production and optimise their costs.”

The sale of Atlantic Nickel and MVV marks the company’s fourth and fifth exits this year. The group has now deployed half of the $775m raised for its second fund and expects to be fully invested within the next three months.

There are only a handful of specialist private equity groups in the mining industry, including Appian, EMR Capital and Orion Mine Finance.

Mainstream buyout groups have largely avoided the industry because of its cyclical nature with uncertain cash flows as well as unique social, environmental and governance risks, and long lead times — it typically takes more than a decade to gain permits and develop a new nickel mine.

The funds run by Appian typically look to invest and develop midsized mines that are two to three years from production.

Looking ahead, Scherb said that approach would change and Appian could look to partner with big miners to develop assets and also consider early-stage investments to try and fill the “exploration void”. This could be in unloved commodities, including mineral sands and precious metals.

“Our model is evolving,” he said.

Citigroup and Standard Chartered advised Appian on the sales of Atlantic Nickel and MVV.

Financial Times: Neil Hume, Natural Resources Editor

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