[miningmx.com] — ANGLO Platinum accepted a 30% discount on its empowerment asset transactions last week and Mvelaphanda Resources scored a R3bn profit from the arrangement, analysts say.
These are the highlights of what must go down as a goodly, lip-smacking piece of dealmaking in which Anglo American oversaw the sale of key platinum assets and shares worth about R10.9bn.
There was much talk of the broad-based effects of the empowerment transactions, and much talk, too, of women in mining, which is very modish at the moment. Government officials seemed satisfied enough, however. Only Northam Platinum got the short end of the stick, but even then, the huge price it paid for its future may reap dividends, even if short term ones will be somewhat diminished. There can be few complaints.
If the 30% discount Anglo Platinum suffered on the sale of its assets looks a particularly heavy one, and heavy too for its 76% owner Anglo American, look again.
At a 30% discount, the R7.6bn of deals – which excludes the R3.3bn employee share scheme (ESOP) – is worth “value leakage’ of around R2.28bn. While that’s a giant sum by most standards, it’s just 1% of Anglo American’s R200bn market capitalisation. That’s a small price to pay for achieving regulatory compliance, especially since Anglo Platinum is the single largest contributor to Anglo’s earnings.
And just how have Anglo Platinum’s chances improved when it applies for new order mining licences? Norman Mbazima, acting joint CEO of Anglo Platinum, won’t say just how many credits the group hopes to have achieved, remembering that South African mining firms needs to have sold 26% of equity by 2014.
However, Jacinto Rocha, deputy director-general at the country’s minerals & energy department, and responsible for licensing, says it looks promising for Anglo Platinum. “I think they’ve done what they needed to do. Now all that’s required is they make the applications.’ His presence at this transaction announcement was notable.
From a point of stagnation 12 months ago, Anglo Platinum has suddenly turned its empowerment ship around. We can probably lay that transformation at the feet of Anglo CEO Cynthia Carroll, who has used her outsider status to lay aside historical animosities between Anglo Platinum – which once threatened to take the South African government to court – and state officials.
Anglo Platinum also appears to have relented on other important aspects, such as allowing Northam Platinum to have its metal refined wherever it pleases. Previously, Anglo Platinum always wanted to hitch the sale of its 50% stake in Booysendal, a project with 112 million oz of PGM resources, to an off-take agreement. “The question of off-take agreements was never an issue, never a debate,’ said Lazarus Zim, chairman of Mvela and Northam Platinum.
However, there now appears to have been a fundamental shift in the Anglo Platinum culture: where it was once obstructive it’s now permissive. “This was about empowerment,’ says Mbazima of the deals with Northam Platinum.
As it turned out, the market responded favourably to Anglo Platinum’s new-found pragmatism, marking the share up 4.7% on September 4 when the transaction details were released.
But analysts say it could have done more with its ESOP, worth up to 1.5% of Anglo Platinum’s issued share capital. Mbazima hailed the ESOP as the largest in South Africa by value. But it isn’t in terms of shares released, and has been subsequently eclipsed by Sasol’s subsequent ESOP in which 4% of its R17.9bn share ownership scheme is for its employees alone.
“Does Anglo Platinum’s empowerment deal do much for the country?’ asks one analyst. It could have empowered employees more, and some of the projects it says will be developed now they’re in the hands of other producers would have been developed anyway.
There’s also some job creation, but one feeling is that the empowerment deal was a massive corporate event, the main beneficiaries of which are Anglo Platinum and Mvelaphanda Resources.
For example, take the handsome profit Mvela stands to book on the resale of the Booysendal prospect to Northam Platinum in return for Northam shares. In essence, Mvela bought 50% of Booysendal, together with 22.4% of Northam, for R4bn. Since it already owns 50% of Booysendal it then on-sells 100% of the prospect to Northam for R6.25bn. Analysts reckon that Mvela made a profit of R3bn.
Mvela, which will own about 63% of Northam, may well justify the resale price of Booysendal on the basis it used its empowerment status to facilitate a transaction Northam would never have achieved on its own.
As for Northam, its board accepted the Mvela offer because it’s a classic price taker. Without Booysendal, it’s terminally in decline as a company. That’s because it only has one mine, which is ageing – it has a life of 16 years – and becoming more costly.
Northam’s shares shed 9% in the two days after the announcements. It seems shareholders don’t immediately prefer it swapping its high dividend yield history for a growth future. That may change over time because Northam has become a long-term game – assuming its minority shareholders accept Mvela’s offer for Booysendal. Of the shareholders allowed to vote, 40% have accepted the bid. Mvela requires 50% to win the day.
