Zanele Mavuso-Mbatha, CEO, Incwala Resources
Send this article to a friend
Print this page

» Frandsen quits Incwala Resources
» Incwala quits R1.2bn Mvela deal
» Mvela says Incwala merger makes sense
» Incwala backs under-fire Mills

» JSE:LONMIN PLC:
19883c 0%

Incwala buys R800m Akanani stake
David McKay
Posted: Wed, 18 Jul 2007

[miningmx.com] -- INCWALA Resources, a black-owned platinum investment company, has bought a 26% stake in Lonmin's Akanani platinum group metal (PGM) project in South Africa's northern Bushveld, and said it would target more acquisitions.

"This should be the first of many targeted acquisitions," said Incwala Resources CEO, Zanele Mavuso-Mbatha. "While our focus remains on PGMs, Incwala will be opportunistic outside the sector where opportunities present themselves."

Incwala Resources owns 18% of Lonmin, a company that has gained 328% in value since Incwala's investment was unveiled in September 2004. Several Johannesburg bankers told Miningmx in May that they were competing to refinance Incwala which was now over-secured on its Lonmin shares.

Mavuso-Mbatha said a bank had not yet been appointed to help refinance the company but confirmed Incwala's future financing power would be "significant". Incwala had made "large inroads" into its $490m debt, the amount for which it bought its 18% in Lonmin.

She also said a listing was a possible funding route for the company. "Listing is not an end in itself. It's a tool for us. We wouldn't discount it," Mavuso-Mbatha said. It's worth bearing in mind that as a 26% holder in Akanani, the company will have a $260m capital call to help build the mine. This assumes statements by Lonmin it could spend $1bn to develop Akanani. "These are the figures bandied around. But there's no definition yet," she said.

In terms of the deal announced today, Incwala is to pay R800m for its stake in Akanani which it will purchase off the project's existing empowerment participants. Lonmin paid R3.9bn for AfriOre, the Toronto-listed firm that owned Akanani.

A 26% stake of the R3.9bn Lonmin paid for AfriOre implies Incwala enjoyed a 21% discount for Akanani, Mavuso-Mbatha said.

The Akanani deposit contains an estimated 32 million ounces of PGM and could host a 625,000 oz/year mine, according to a statement by Brad Mills, Lonmin CEO on May 2. In addition, Incwala’s attributable share of current resources is in excess of 8 million ounces.

However, critics of the project say that although a very thick orebody, Akanani has not been thoroughly drilled and is therefore untested. The project may also suffer the effects of a lack of water.

Click Here to subscribe to our daily newsletter
"It is very early days to make brave forecasts on this deep-level more massive orebody," said JP Morgan analyst, Steve Shepherd in a note dated May 2.

"We are aware that there remains a critical water shortage in the region that has prevented Anglo Platinum expanding its established and shallow PPRust mine. We await Lonmin’s plan to supply any new mine with this 'liquid gold'," he said.

However, Mavuso-Mbatha said Incwala was "pleased" to have made the investment. "We trust in Lonmin's management which has been making plans to have water available as well as power from Eskom."

Akanani would help the company become a fully operating company. A number of new appointments, including technical experts, were being considered as the company sought operator status, she said.

"This should be the first of many targeted acquisitions as we progress towards becoming a fully-fledged operating company and we look forward to operating Akanani with Lonmin,” said Mavuso-Mbatha.

More platinum assets and coal interests were being considered, said Mavuso-Mbatha. "We're open-minded on this. It could be a combination of coal or gold. In mining in general, there is a huge consolidation opportunity.

"Incwala would like to be a player in this regard," she said. "Expect more corporate action in months."