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Implats outlines R21.2bn bid for Northam, Mvela
Allan Seccombe
Posted: Thu, 02 Oct 2008
[miningmx.com] -- IMPALA Platinum has made a conditional offer for the full control of Northam Platinum and Mvelaphanda Resources in a share and cash transaction valued at around R21.2bn, giving it additional production and shallow, low cost ounces in the future Booysendal project.
Booysendal has a resource of 100 million oz of platinum group metals and could be a more than 480,000 PGM oz/year producer. Implats reckons it can be brought into production from 2012 and reach full production by 2020.
"The value of the combined portfolio of platinum assets will be maximised by the financial resources and skills sets of the combined companies and will provide Implats with immediate access to additional current and future production ounces in South Africa, and in particular shallow future production through the development of Booysendal," said Implats CEO David Brown.
The
transaction involves Mvela unbundling its 62% stake in Northam to its shareholders. Implats will then buy 100% of Northam and then acquire 100% of Mvela, the three companies said in a joint announcement.
Implats is proposing the equivalent of 35 of its shares for every 100 in Northam, which based on the closing prices on 1 October, values the transaction at R21.136bn.
Implats suggests it will settle 70% of the purchase in its shares and the rest in cash, which means Northam shareholders will receive 24.5 Implats shares per 100 Northam shares and the cash equivalent of 10.5 Implats shares.
Brown said Impala was confident of raising the funds despite the turmoil in the global financial markets. "We are paying a fair price considering the assets, which will increase our resources by around 30 percent," he told Reuters.
Again, based on the 1 October closing share prices, Mvela shareholders will receive R89m for what is left in Mvela, being its 21%
stake in diamond miner Trans Hex and its deferred 15% of Gold Fields' South African mines.
Both these assets are highly likely to be sold. The Gold Fields transaction matures in March next year, around the time when the Impala deal is concluded, said Mvela spokesman James Wellsted.
"Subject to a due diligence review by Implats and approvals from the respective company boards, Implats has
offered Northam and Mvela Resources a combination of its shares and cash, which, based on closing share prices on 1 October 2008, represent premiums of 28% per Northam share and 26% per Mvela Resources share," Mvela said.
"The Independent Board Committees of Mvela Resources and Northam have considered the letters of interest and, subject to external independent advice, are supportive of the strategic rationale, and believe there is merit in progressing with the Proposed Transaction," it said.
Impala's shares closed down 11% at R147, well below the 1 October price of R165.75 on which the deal is valued. Northam was down four percent at R43.50 and Mvela shed five percent at R42.10.
The Department of Minerals and Energy has been consulted about the deal and has indicated its support, Wellsted said, adding the deal could not go ahead if Anglo Platinum, which sold its 50% stake in Booysendal to Mvela to attain empowerment credits, and Gold Fields did not
retain their empowerment credits.
Analysts have said this is a great transaction for Implats because it moves the company away from its deep-level costly development projects like Leeuwkop and instead give it shallow, cheaper ounces that can be brought into production more quickly.
Northam has a producing mine, but it is the deepest in the industry and geologically challenging. Despite that, Northam generated R1.5bn in post-tax profit in the year to end-June. It has R1.5bn in cash. It has its own smelter and a platinum refining agreement with Heraeus, which will remain in place for Northam's production as well as half of that from Booysendal.
Northam produced 293,000 oz of PGMs in the year.
The jewel in the crown is the Booysendal deposit, which Mvela and Northam acquired from Anglo Platinum, taking over that company's 50% stake in the property.
"Mvela Resources and Northam’s combined strategic intent of organic growth at Booysendal
and proactive acquisitive growth to consolidate the fragmented junior PGM sector is sound and can still be implemented in my opinion" said Mvela CEO Pine Pienaar.
"But we remain cognisant of the current global macro-economic environment, which has become significantly more challenging and an offer which can diversify risk and realise immediate value for our stakeholders needs to be considered by shareholders," he said.
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