Sam Jonah of Jonah Capital

Andulela: Yes but, no but

Marc Hasenfuss | Thu, 07 May 2009 12:49
[miningmx.com] -- ANDULELA Investments, the junior platinum group headed by mining magnate Sam Jonah, sowed seeds of confusion in the market on Wednesday by issuing two very different SENS notices on the same subject.

Andulela (previously DNA Capital) holds a 41,8% stake in Kilken Platinum, a company that processes tailing at Rustenburg Platinum. Andulela paid Jonah Mining R450m for the stake in Kilken in 2008 - a deal that was settled by the issuing of preference shares, new scrip and R90m in cash.

Jonah Mining held the 41.8% stake in Kilken via a 50% shareholding in Abalengani Mining Investments (AMI) and JB Platinum Holdings (JBPH). The remaining 50% shareholding in each of AMI and JBPH is held by Abalengani Platinum.

The subject of Andulela’s confusing SENS notices on Wednesday (one released early in the morning and one late in the afternoon) was the CALL and PUT options granted to Andulela and empowerment group Abalengani over the remaining 50% of the shares in AMI and JBPH.

If the AMI and JBPH options are exercised then Andulela will effectively increase its stake in Kilken Platinum to 83.6%.

If the AMI and JBPH options are exercised, Andulela's consideration for both options amounts to R450m - a transaction that may be settled by issuing new Andulela shares. That could be steep price to pay for Andulela as the value of its Kilken stake has already been heavily impaired.

Andulela's recent interim results noted that new shares to settle the options will be issued at a price equal to the volume-weighted average traded price of the group's shares 30 trading days before the options are exercised.

At current prices Andulela would be looking at issuing more than 7bn shares.

As Fin24 pointed out earlier this year, such a share issue would represent a more than fifteenfold increase in Andulela's issued share capital.

Andulela’s SENS notice on Wednesday morning seemed to offer some hope that the CALL and PUT options – that would seriously dilute existing shareholders - may not be called off or revised.

The notice said the outstanding condition permitting the exercise of the put option granted to Abalengani had been fulfilled.

But more importantly the notice said that while put and call options could be exercised between May and the end of October this year, the terms were currently under discussion as between Abalengani and Andulela.

Then came the clincher: "The company and Abalengani Platinum have agreed that pending the outcome of the current discussions, neither the PUT option nor the CALL option will be exercised."

Naturally Andulela shareholders – who have seen their investment value decimated in the last 10 months – could be forgiven for interpreting this to mean that the PUT and CALL option arrangement may be called off.

But late on Wednesday afternoon Andulela issued another SENS announcement advising that no agreement had been reached around the PUT and CALL option.

This was followed by a ‘replacement’ cautionary, which stressed that the terms of the CALL and PUT arrangement were currently under discussion between Abalengani and Andulela.

One might suspect at this point that Abalengani is probably not to keen to relinquish its valuable PUT option. But one has to consider whether Abalengani really want to be issued with billions of Andulela shares.

Perhaps the best Andulela shareholders can hope for – at this delicate juncture - is that the company and Abalengani can find some kind of middle ground around the option arrangement.

Whether this could entail revisiting the terms of the option agreement would probably depend on the magnanimity of Abalengani.

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