African Rainbow Minerals and Norilsk Nickel Africa have signed a Sale Agreement (“PSA”) which provides for the acquisition by ARM of NNAf’s 50% participation interest in its partnership with ARM that operates the Nkomati mine for a cash consideration of R1 million.
ARM will take over the environmental liabilities of Nkomati mine, together with NNAf’s proportionate share of the obligations and liabilities relating to the Nkomati mine’s assets, with a R325m contribution from NNAf, as may be adjusted under the terms of the PSA.
The PSA provides for terms customary in agreements of this nature and includes (amongst other things): (i) limitations on liability and certain negotiated warranties, indemnities and undertakings; (ii) provisions governing the operation of the Nkomati mine during the interim period; and (iii) customary termination rights.
The Transaction is expected to close during 2024. The existing partnership agreement between ARM and NNAf in relation to the Nkomati mine will terminate immediately following successful closing of the Transaction on the closing date.
Background on Nkomati Mine
On or about 31 March 2021 mining ceased at Nkomati mine and the operation was placed on care and maintenance. On 16 June 2021 ARM and NNAf concluded a Memorandum of Understanding (MOU) which set out the terms and conditions of a PSA.
The status quo for Nkomati mine continues to be challenging due to uncertain commodities and nickel sector outlook and ongoing care & maintenance costs.