Trans Hex recoups losses on NM deal

[miningmx.com] – IN an display of shrewd corporate stage management, Trans Hex said today it had finalised an agreement for the takeover of Namaqualand Mines (NM) from De Beers – an announcement three years in the making that saw it recoup just over half of its share losses suffered earlier this week.

Trans Hex lost a fifth of its market on October 28 after it said its interim results, due to be published around November 1, would show a hefty R87m turnaround in fortunes year-on-year. Grade management problems, and a three-week strike at its South African assets would result in a loss of R53.9m from a R32.9m profit previously. That news, however, will be softened by the takeover of NM.

That’s because the completion of NM from De Beers has greater strategic importance for Trans Hex which is looking short of operational flexibility after largely withdrawing from Angola leaving it vulnerable to its remaining South African assets.

The major sticking point in the acquisition – which was first announced over three years ago – was how to manage the state’s 20% stake in NM: whether it would be retained, and if so, how it would be structured.

The outcome is that the state will, in fact, retain its 20% stake to be held through a special purpose vehicle (SPV), capitalised by De Beers, the seller of NM.

This means that Trans Hex’s acquisition – which is to be through its 50% stake in Emerald Panther Investments – would fall to about R60m from R83m previously as its stake was diluted by the SPV.

In addition, a loan of R189m has been secured through the Industrial Development Corporation (IDC) which would be used for the initial capital and operating costs of NM which has been in mothballs.

In addition, a “rehabilitation insurance instrument” totalling R166m had also been arranged. The liability of rehabilitating NM has been another sticking point, especially as it related to government, has been another contentious aspect of the NM deal.

Shares in Trans Hex duly rallied. The stock closed at R3.55/share, a gain of 37 cents per share or 11.6% on the day.