Pine Pienaar, CEO, Mvelaphanda Resources
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» Mvela restructures R2.1bn debt
» Implats still looking for assets
» Mvela, Northam plummet on failed deal
» Impala cools its heels on R21bn takeover
» Mvela stares down threat to Booysendal Pt

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Mvela Resources will cease to exist
Allan Seccombe
Posted: Thu, 19 Feb 2009

[miningmx.com] -- MVELAPHANDA Resources could cease to exist within the next two years as it exits its stake in Gold Fields, unbundles its holding in Northam Platinum and decides what to do with its share of diamond producer Trans Hex.

Mvela’s management has for years tried to close the large discount between the value within the investment holding group and the market’s perception of what the firm is worth as seen in its share price with little success.

“If we tried to do deals issuing shares we’d basically discount our shareholders by a third every time we do a deal. That’s a problem. We can’t seem to close this discount because we don’t have ownership of these companies,” said James Wellsted, Mvela’s head of investor relations.
Mvela will cease to exist
“In the Northam deal last year we got one step closer to being an operating company but the discount persisted,” he said. “The best way for us to unlock value for our shareholders is to dissolve Mvela Resources and give them direct exposure to Northam, our primary investment.”

CEO Pine Pienaar said: "Mvela will cease to exist."

One of the key drivers for this strategy is that Mvela has been classified as a pyramid company by the JSE, meaning it cannot continue its listing.

The bourse won’t permit a listed company to generate more than half its earnings from an investment in another listed entity or have more than three quarters of its net asset value tied up in another listed group.

Mvela falls neatly into this categorisation, with its 63% stake in Northam Platinum. Mvela has refinanced R2.1bn of mezzanine debt, extending by a year or so the repayment of that loan. Full details will be made public in coming weeks.

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This means Mvela can take a more considered approach to its sale of the 50 million Gold Fields shares it will take ownership of on 17 March. At the moment those shares eclipse Mvela’s total debt by R1bn and Mvela says it is bullish of Gold Fields’ prospects and the gold market.

Once those Gold Fields shares are sold and the debt paid down, Mvela will effectively hold just Northam as well as a small stake in loss-making diamond producer Trans Hex.

Talks will have to be held with Remgro, the majority shareholder in Trans Hex as well as management to determine the best exit for Mvela.

By unbundling its stake in Northam a lot of pent up value is expected to be released there too leading to a re-rating of the share, with improved liquidity in the shares, increased cash levels and unfettered growth prospects.

Northam’s wholly owned Booysendal prospect has received no recognition from the market because of perceptions that cash flows from the group are inadequate because Mvela needs the best dividend inflows possible to finance its debt.

Northam will wrap up a feasibility study into the Booysendal prospect in the third quarter of 2009. It is likely that it will issue shares to raise the roughly R2.5bn it needs to build a mine. Mvela will follow its rights and then unbundle all its Northam shares to its shareholders and dissolve the company.

The process could take up to a year and a half, Wellsted said.

“Northam will be in a much better position and its shares re-rated. They will be able to fund Booysendal, its liquidity will increase, its growth prospects will be more certain. There are a lot of benefits,” he said.

Another option is that Northam buys Mvela and its investments, making the latter a subsidiary. Mvela has a joint venture with world number three platinum producer Lonmin at Dwaalkop.