[miningmx.com] – NORTHAM Platinum is legally obliged to offer new ‘A’
shares in itself to Mvelaphanda Holdings (Mvela Holdings), according to a source who
is familiar with the proposed transaction.
“Mvelaphanda Holdings will participate. It is a legal imperative on Northam,” said a
source by text message. “It’s not v. dilutive,” he added, without providing further
details on the structure of the transaction.
Northam Platinum said on August 3 that it had been requested by the mineral
resources department (DMR) to restore its empowerment shareholding to 26% after
Mvela Holdings and Afripalm Resources sold down as much as a combined 10% of
Northam stock in order to prevent breaking bank covenants.
Northam’s proposed structure is to issue ‘A’ shares, which have dividend restrictions,
so as not to prejudice existing shareholders, but are repaid out of Northam’s free cash
flow. Controversially, the beneficiaries include Mvela Holdings and Afripalm.
Analysts and a source within Northam itself said the fact that Mvela Holdings and
Afripalm could sell down their Northam shares and then be topped up again
underpinned a key weakness in Northam’s empowerment structures, and in BEE in
general.
Northam said it would issue a circular providing further details of the new BEE
structure and plans to raise outstanding finance for its R4bn Booysendal project,
ahead of a shareholder vote, at a proposed extraordinary general meeting.
Minority shareholders in Northam include Sanlam Investment Management (with a
4.6% stake) and Coronation Fund Managers (4.1%), both of whom declined to
comment on the matter, saying it was either too sensitive or that there wasn’t yet
enough information to comment. A third minority shareholder, the Public Investment
Corporation (6.1%), had not responded to inquiries at the time of writing.
One former DMR source, and a platinum industry executive, said the seeds of the
legal obligation on Northam were in the original 2007 empowerment deal in which
Anglo Platinum (as it was then called) sold 53.1 million shares in Northam to Mvela
Resources, the now defunct listed subsidiary of Mvela Holdings. This deal took Mvela
Resources’ stake in Northam to 63.4%, making it a BEE-controlled company.
“You’ll probably find there are grandfather clauses in this control, the converse of
which means Mvela Holdings can’t be diluted down,” a source said.
Analysts have said that Northam is now paying for a poorly constructed empowerment
deal, but this isn’t the first time shareholders have had to dig deep to salvage
transactions, the success of which are predicated on dividend flow.
Earlier this year, a third iteration of Anglo American Platinum’s (Amplats’) Bokoni
Platinum Mines empowerment deal with Atlatsa Resources (formerly Anooraq
Resources) was announced; while Incwala Resources, an empowerment deal involving
Lonmin, also had to be rescued.
Stuart Murray, CEO of Aquarius Platinum, said this week that his company’s
empowerment transaction with the Savannah Consortium, was “a totally different
structure” to that of Northam’s. Aquarius’ share price is down close to 80% since the
beginning of the year. “We don’t have converted mining licences to any specific BEE,”
he said.
