Metorex sells Pan African

Brendan Ryan | Thu, 25 Jun 2009 20:30
[miningmx.com] -- METOREX has finally decided its controlling 53.4% stake in gold producer Pan African Resources (Pan African) is “non core” and has decided to sell it to raise R386m which it will use to pay down debt.

Miningmx speculated in February that the Pan African stake might be up for sale despite the statement by executive director Charles Needham in his presentation to the Mining Indaba that this was viewed as a core asset.

Metorex chairman Rob Still commented at the time that, “as Metorex is currently under cautionary, I am not able to be specific but given the right price we would consider selling our stake in Pan African which could be regarded as non-core.”

The Pan African shares have been sold at a price of R0.65 each. Metorex has been forced to dispose of various assets to fund the ramp-up of production from its Ruashi copper/cobalt mine in the Democratic Republic of Congo.

According to CEO Terence Goodlace, Metorex remains under cautionary notice because it is still looking to sell further assets.

Goodlace commented, “we are not yet out of the woods but this disposal gives us the opportunity to settle the bridging loan from Standard Bank plus head room to settle other creditors.”

Goodlace declined to specify what Metorex was still looking to sell but, having already sold the Phoenix Platinum tailings treatment operation to Pan African, the list has narrowed down considerably.

Assuming that the Vergenoeg fluorspar mine remains core then the choice boils down to the Chibuluma copper mine in Zambia and South African antimony/gold producer Consolidated Murchison.

Chibuluma is by far the more marketable asset. One industry executive has described Consolidated Murchison as a “non core liability” .

Metorex acquired control of Pan African through a reverse takeover by injecting its Barberton Gold Mines division into the company.

That was supposed to achieve a better investment rating for the Barberton mine through putting it into a focused, listed gold company instead of keeping it within what was a mid-tier diversified mining group.

The hoped-for rerating has never materialized while Pan African has apparently been hindered by the lack of liquidity in the share given that it was controlled by Metorex and BEE partner Shanduka.

That has now changed radically. Shanduka recently “flipped up” its 26% stake in the unlisted Barberton mine for a 21% stake in listed Pan African.

It has now bought a further 5% in Pan African from Metorex to take its stake to 26% and Shanduka chairman Cyril Ramaphosa will be the new chairman of Pan African.

Pan African CEO Jan Nelson has welcomed the development pointing out that the “free float” in Pan African shares has been increased to 74% which he believes will be beneficial to the company’s investment rating.

Nelson commented, “ we had a very good relationship with Metorex and we regret not being able to benefit from the experience of Terence Goodlace (a former COO of Gold Fields) but their controlling 53.4% stake made it very difficult for us to attract institutional investors to the company.

“We are delighted to be independent. Having Shanduka as our partner will be beneficial because we will be their chosen vehicle for future gold projects.

“ The book building exercise run by Metorex to sell their Pan African shares has brought institutions such as Coronation, Allan Gray, JP Morgan and Investec on board as substantial shareholders.”

According to a Metorex statement the book build to sell the shares will become unconditional on July 1 but the sale of 5% Pan African to Shanduka is classed as a “small related party transaction” in terms of the listing requirements of the JSE.

That means it is subject to a number of suspensive conditions including a ruling from the Securities Regulation Panel that Shanduka will not have an obligation to make a mandatory offer to the other Pan African shareholders. The writer owns shares in Metorex and Pan African Resources.