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Investors jittery about Implats BEE deal, says Coronation's Hugo Nelson
In an interview on ClassicFM @ 6:40 on 28 November 2005
[miningmx.com] -- The R30 per share slide in Implats' shareprice on Monday was more likely a function of investor uncertainty around a black economic empowerment deal than worries about it possibly pulling out of a Madagascar nickel project, said Hugo Nelson, a fund manager with Coronation.
Implats said on Friday it is finalising a broad-based economic empowerment (BEE) deal but gave no further details. Implats' shares fell R30 on Monday to R855.
"It's hard to put a finger exactly on the cause for the fall. It started since the opening. It probably has something to do with the concerns people have around the cautionary, more because details aren't available rather than based on any kind of knowledge of what exactly they're going to be announcing," Nelson told the Classic business radio show.
"There is a bit of concern over what may happen in the BEE deal though, although I
think it may be a bit overplayed," he said.
The most likely partner in the deal would be the Royal Bafokeng tribe, which receives royalty payments from Implats.
"The Royal Bafokeng are the most likely. Implats has said they are the preferred candidate," Nelson said.
"Historically, the stumbling block has always been the valuation of the royalties because of uncertainty whether the royalty they pay the Royal Bafokeng gives them an offset to the government royalty, which will be a mineral rights royalty.
"It appears they've overcome that hurdle and, reading between the lines, one gets the impression their relationship has improved and they're ready to move forward," he said.
"I think we'll see them giving a little bit of facilitation in the deal, which to some extent will cost shareholders a little bit, but the Royal Bafokeng have a good strong balance sheet and income so they'll meet somewhere half way," Nelson said.
Commenting on the
announcement from TSX-listed Dynatec that Implats might pull out of the Ambatovy nickel project in Madagascar, Nelson said Implats had possibly looked at the rising capital costs and adopted a more realistic nickel price of around $4 a pound and decided it was not worth it.
"The capital cost bill, which together with the rising cost of production, appears from the Dynatec announcement, to have caused Implats to have significant second thoughts about going ahead with the project," he said.
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