The gold miner has signed a term sheet with Australian Securities Exchange-listed company the Waterberg Coal Group to get access to coal for power generation.

Under the deal Sibanye will get a secured convertible note in the Waterberg Coal Company – part of the WCG – from a consortium of lenders comprising the Standard Bank of South Africa and Abu Dhabi Investment Council for $A22.5 million.

Sibanye will inject $8.5 million of working capital into the Waterberg Coal Project to let WCG further progress it.

Also under the deal Sibanye will be able to subscribe to enough new shares to achieve a 51% stake in WCG within 18 months of closing. It will also enter into a coal off-take agreement with WCG to feed its independent power producer.

Sibanye has been looking for alternative sources of long-term stable energy supply due to what it calls the “inconsistent and increasingly expensive power supplied by Eskom”

The Waterberg Coal Project has been identified as having the potential to provide Sibanye with a sizeable coal resource base that could underpin the development of its own power generation.

Sibanye CEO Neal Froneman said Waterberg had the potential to be medium to long-term sustainable power solution.

“The multi-product nature of the WCP, provides the ability to produce energy from coal that would otherwise been thought of as discard, in an economically viable manner,” he said.

“This will facilitate Sibanye securing a reliable energy supply while simultaneously having a greater control over energy costs.”