Mining conglomerate Anglo American (LON:AAL) has sold its loss-making Rustenburg platinum assets in South Africa for ‘at least’ R4.5bn (£210mln).
Sibanye Gold will pay R1.5bn (£70mln) upfront and will pay Anglo 35% of Rustenburg’s free cash flow for six years, with a maximum potential earning of R20bn (£950mln).
Broker Liberum said the minimum payment was as expected, but added that given the assets are far from being free cash flow generative at current prices, the market will be assuming Anglo will only receive R4.5bn.
Other details were vague, with it being unclear if the upfront payment will be made in cash or shares.
Liberum added: “The possibility that the upfront payment could come as shares is disappointing, but Sibanye have said they will endeavour to pay as much in cash as possible.”
Anglo announced it would scale back its South African platinum business in 2012.
It has already reduced the Rustenburg mines from five to three, and today’s sale sees it continue to cut ties in South Africa.
Chris Griffiths, chief executive of Anglo American Platinum (Amplats), said: “We are focusing on our core assets and exiting those assets we have identified as non-core.
“Our focus from the outset has been to identify the right option for the business and we believe we have concluded a beneficial transaction for both parties.”
The Rustenburg Operations are held at a net asset value of R7.7bn, so there will be a small write-down.
Shares rose 7% to 753p, the highest riser on the FTSE 100, as investors cheered the news.