Anooraq, Amplats unveil rearranged deal

[] — ANGLO American Platinum (Amplats) on Thursday
unveiled the long-awaited restructuring of its investment in empowerment partner,
Anooraq Resources – a radical R5bn refinancing and recapitalisation plan that also
sees it revamp operational management, and accelerate a 100,000 oz/year
production expansion at Anooraq and Anglo Platinum’s Bokoni Mine.

Amplats will also extend its current preference share investment in Anooraq by
transforming it into a long-term equity investment through to 2019, in a step it
hopes will remove uncertainty regarding its commitment to an empowerment deal it
first announced in 2007.

Since taking over management control, Anooraq has struggled to increase levels of
output from Bokoni Mines (formerly Lebowa Platinum) with production remaining flat
between 2009 to 2012. An earlier announcement regarding the return of seasoned
mine manager, Dawid Stander, to Bokoni Mines is a step in getting the mine to finally
perform. Stander was the general manager at Bokoni Mines between 2001 and 2005,
during which period Bokoni became one of Amplats’ best performing operations.

In terms of the transaction, Anooraq’s R3bn debt pile, which has carried interest of
16%, will be reduced to R1bn. This will be achieved by Anooraq selling 31 million
ounces of undeveloped platinum resources to Amplats in a deal valued at R1.7bn. In
addition, an interest standstill on existing debt, back-dated from July 1 2011 to April
30 2012, will remove a further R300m debt from the Anooraq balance sheet.

Amplats and Anooraq will then contribute R1.3bn each to expand Bokoni by
developing the Middelpunt/Brakfontein sections of the mine and establishing a new
concentrator plant at the operations. The Middelpunt UG2 expansion was originally
planned to commence in 2020, but will be brought forward to ensure that high-cost,
marginal operations at Bokoni’s old Merensky shafts are replaced with new, lower
cost production ounces and increased volumes. This should lead to lower unit costs
over time.

The debt provided by Amplats to Anooraq for the new development plan at Bokoni
Mines will carry interest of 0.5% in its first year, escalating to a weighted average of
7% through to 2020. This represents a R500m saving on Anooraq’s current cost of
debt (16%) and will see Bokoni Mines output increase to 300,000 oz/year from
115,000 oz/year currently.

A new Bokoni management structure will be formed. Both parties will supply
management services to the mine. “Throughout the restructuring, Anooraq does not
issue a single new share,’ said Joel Kesler, an executive director at Anooraq. It is
thought that slicing R2bn of debt off Anooraq’s balance sheet, by selling off
undeveloped resources, accelerating production growth at Bokoni Mines and
becoming fully funded through to 2020 on attractive terms should lead to an uplift in
Anooraq’s net asset value per share.

For Amplats, this is a transaction that it dare not fail. In 2007, it announced two
platinum-related empowerment deals, of which one was the investment by
Mvelaphanda Resources in Northam Platinum. Although Northam still has its
empowerment stake, Mvelaphanda Resources – as originally envisaged – did not
become the platinum power house having delisted and ceased to exist last year.

The mineral resources from the Boikgantsho project that Anooraq is selling back to
Amplats will provide Amplats with expansion potential on the northern border of its
Mokgalakwena (old PPRust) mine. Bokoni Mine has also extended an offtake
agreement with Amplats by eight years to 2020. “The deal demonstrates
empowerment is not an event, but a process,’ Kesler said.