[miningmx.com] – THE last thing French group Total South Africa would have expected was for the empowerment credentials of its proposed sale to Exxaro Resources, a 52% black-owned, black-led mining group to be questioned.
Yet in the whacky word of the Department of Mineral Resources (DMR) that is exactly what has occurred; at least, on the evidence of a quote attributed to mines minister, Ngoako Ramatlhodi, by Bloomberg News.
He told the newswire service on June 4 that he wanted to see community involvement in the sale of the Total SA coal assets. “I’ve said so,” he said perhaps explaining why the principals of the transaction are waiting on DMR approval nearly 12 months after first announcing it to the market.
Why would the mines minister bring the parties back to the negotiating table at this late juncture, particularly seeing as Exxaro is about the most perfect buyer, especially from an empowerment perspective?
Let’s count the ways.
According to Exxaro’s shareholder schematic published on its website, roughly 0.81% of the company is owned by Exxaro Mpower which is the company’s employee share option plan.
A further 11.22% of the company is Basadi ba Kopane Investments Propertary Ltd, which represents woman’s ownership in the company.
According to a presentation by Exxaro CEO, Sipho Nkosi in 2008 in which he presented the company’s BEE as a case study, this company consists of the National Movement of Rural Women, Malibongwe, SAWIMA, Xiphemu Investments, SAWIMH, Nozala Investments and Northern Cape National Movement of Rural Women.
Morning Tide Investments 168 Proprietary Ltd owns a further 9.71% of Exxaro representing the vehicle through which KagisoTiso – the Kagiso Trust and Tiso Foundation – has invested in Exxaro. Nkosi said KagisoTiso encouraged “a sustainable and socially responsible business approach”.
The point being that if Exxaro isn’t properly empowered, then who is?
And another question is that if the minister is going to personally intervene in every Section 11 application – “I told them so” – then he’s going to be very busy indeed. So much for providing regulatory certainty.
The onus for revisiting the empowerment credentials of the Total SA sale probably falls to the French, not the South Africans. They will probably find it muddies the waters of the commerciality of the deal.
Already, the feeling is that Exxaro’s R4.9bn offer for Total Coal SA is a bit rich (although contrary to some market talk, the company is happy to have clinched the deal and don’t now want out). Diluting to allow for a community therefore complicates matters a touch.
Then, of course, there’s the matter of where Bridgette Radebe, Total Coal SA’s existing empowerment partner, fits in with all this.
Exxaro ticked me off recently for speculating wildly – and inaccurately – on the role of Radebe’s Mmakau Mining in delaying the transfer of ownership rights over the coal mines from Total to Exxaro. So without much new information, it’s not worth saying more on this aspect of the matter.
So what of the transaction?
Thoughts differ on the drop dead date for the deal. One analyst says it was in January, and has presumably been extended; another says end-July.
The expectation is that the deal will go through as it’s worth a lot to Exxaro strategically, and to Total which has extracted a good price and has publicly reiterated it wants to exit coal in favour of gas. But at what cost?
