Amplats to write-off R4.2bn Atlatsa debt, mothballs Bokoni

Bokoni Mines

ATLATSA Resources Corporation (Atlatsa) will put its 51%-owned Bokoni Platinum Mines (Bokoni Mines) on care and maintenance which will remove an estimated 140,000 ounces in annual platinum group metal (PGM) output from the market.

As part of a debt cancellation agreement with its 49% joint venture partner, Anglo American Platinum (Amplats), Bokoni will also sell its Central Block and Kwanda North prospecting rights to Amplats – a second phase of the transaction that is currently complicated by mines minister, Mosebenzi Zwane’s proposal to suspend the transfer of mining and prospecting rights effective July 18.

Joel Kesler, commercial director of Atlatsa, confirmed the sale of the Central Block and Kwanda North sections, which is adjacent to Amplats’ Mogalakwena mine, was a major condition precedent for the transaction. “It is what it is,” said Kesler on the transaction. “But the fact of the matter is that this is the best shot we have of saving the mine in the long-term,” he added.

The other major elements of the restructuring is that Amplats will write-off R4.2bn in current and future debt owed by Atlatsa to it. Mothballing Bokoni Mines also will likely result in the loss of about 3,651 full-time and contractor jobs at the Bokoni premises. “It is very sensitive at the moment but we have issued Section 189 notices to employees and unions at the mine,” said Kesler.

Job loss pain notwithstanding, the mothballing of Bokoni Mines finally addresses one of Amplats’ most pressing – and final – headaches following three years of restructuring which saw it shut loss-making sections at its Rustenburg premises, and then the sale of shafts.

Bokoni Mines, located in the north-western reach of the Bushveld Complex, has been a constant source of aggravation for Amplats which has at least twice re-valued the transaction first firmed in about 2008. It has also refinanced the asset on a number of occasions amid a declining price environment for platinum.

The mine underwent a major restructuring in 2015 with a third of the initial 6,342 jobs cut – a development that was followed in 2016 with a decision to shut the Klipfontein opencast section and delaying the planned ramp-up of the mine’s Brakfontein Merensky and Middlepunt Hill UG2 shaft.

However, the mine lost about R500m in cash in the first six months of this year while attempts to reconfigure it also ended in a dead-end. Amplats said today a plan to introduce an investor or sell the operation also ended in frustration.

“Given Bokoni’s current operational challenges, continued operational losses and negative cash generation, the depressed PGM [platinum group metal] environment, the negative medium-term PGM pricing outlook and Atlatsa Group’s significant debt levels, attempts to implement such alternatives have proven unsuccessful,” Atlatsa said in a statement today.

“In the circumstances, the Bokoni JV partners are no longer able to continue funding losses at the mine with no reasonable short to medium term turnaround prospects,” it added.

The mothballing an impairment of Bokoni Mines recalls the words of Anglo American CEO, Mark Cutifani, in a presentation at the Gordon Institute of Business Science in Johannesburg during 2014 when he remarked that sometimes empowerment deals must be allowed to fail.