Mvela opts for unbundling over deal

David McKay | Thu, 04 Jun 2009 09:53
[miningmx.com] -- MVELAPHANDA Resources (Mvela Resources) has abandoned plans to buy a major mining asset that would have removed the need for it to delist from the JSE, the group said.

The JSE demanded that Mvela Resources dilute its 62% stake in another listed firm, Northam Platinum, by the third quarter or fall foul of rules that forbids such pyramid structures.

Mvela Resources also took into consideration whether its listed structure would ever realise full value and whether perhaps an unbundling provided better value for shareholders amid a volatile mining market.

As a result, the R7bn mining investment group had reconfirmed its intention to unbundle its stake in Northam Platinum, divest of its remaining stake in Gold Fields, and dispose of a 20.7% (fully diluted) holding in Trans Hex, a diamond firm.

The group expects to delist from the JSE in the first quarter of 2010. Pine Pienaar, Mvela Resources CEO, has resigned with immediate effect, although he would consult exclusively to Mvela Resources for two months.

“The board has reconfirmed the strategy to unbundle the company’s stake in Northam Platinum,” said Lazarus Zim, Mvela Resources chairman. “There are benefits to all in this including the empowerment,” he added.

Zim, who is also founder Mvela Resources’ 19% economic (31% voting) shareholder, Afripalm Resources, said continued market volatility outweighed the benefits of a planned transaction.

“We said in February that we would run two work streams where we would continue to evaluate other opportunities,” said Pienaar of an option to buy another asset, believed to be Optimum Coal Holdings. “But such a deal had to outweigh the benefits of unbundling.”

Zim said there was R2bn worth of value in Mvela Resources that would be unlocked. He added that Mvela Resources’ discount to net asset value, estimated to be 30% or more, would never be removed.

However, Zim said empowerment had not been sold down the river in the dissolution of Mvela Resources, the first truly empowerment mining firm to list on the JSE. “This has been painted as the sale of empowerment. But what you have [with the unbundling of Northam shares] is a company with a 27% black holding,” he said.

It was likely Northam Platinum, on completion of a feasibility study into the development of a prospect called Booysendal, would launch a rights issue – a development Zim said Mvela Resources was able to afford. “The Mvela Resources shareholders will have no debt and cash to follow the rights, and then some,” he said.

"This announcement signals a positive outcome for Northam shareholders, as we gain further certainty in terms of the financing options available to us for the development of the Booysendal project," Northam CEO Glyn Lewis told I-Net Bridge, a news service.

"We have made significant progress with the feasibility study, which is expected to be completed by the end of September this year," he said.

"We remain optimistic that Booysendal is the most promising new project currently being planned in South Africa; in addition our planning has the built-in flexibility to allow incremental production build-up to meet market demand," said Lewis.