[miningmx.com] — CONTROL of Royal Bafokeng Platinum (RBPlat) was key to the consolidation of the surrounding platinum mining district and was unfinished business for Impala Platinum (Implats).
That was the clear message from Implats CEO David Brown, interviewed after he presented the group’s interim results for the six months to end-December in Johannesburg on Thursday.
In October last year Implats bid just under R20bn for control of the Bafokeng Rasimone Platinum Mine (BRPM), ahead of its listing on the JSE as RBPlat.
The offer was accepted by Royal Bafokeng Holdings (RBH – the business arm of the Royal Bafokeng Nation) but scuppered by Anglo Platinum (AngloPlat) which vetoed it in terms of its joint venture agreement with RBH over BRPM.
RBPlat subsequently listed in November, with an initial market capitalisation of about R10bn – about half of what Implats had offered.
RBH CEO Niall Carroll launched a blistering public attack on AngloPlat in October, saying the group had chosen to “frustrate our legitimate aspirations, even as a minority shareholder in a significant black-owned entity”.
He said: “Given our significant shareholding in Implats and the contiguity of BRPM to the Impala lease area, there was clear logic for a combination of these two assets and a consolidation of RBH’s equity interests into one platinum producer.”
Brown has kept his silence on the developments, but told Miningmx on Thursday: “AngloPlat had the right to veto the deal and I have to respect their decision. But that’s not the end of it, because that veto right will expire and then who knows what might happen.’
He said: “This was a value-enhancing proposition for everyone – including AngloPlat – but the wheels came off when we approached them.
“I found their reaction was not completely commercial but contained some emotion and an attitude that could be described as “over our dead body’.
“With hindsight I would not have changed the value proposition, but should have engaged in more dialogue to try and get AngloPlat more comfortable with the proposal.’
There has been long-running market speculation over possible consolidation moves in the region, which sits adjacent to Implats’ new 20 shaft which started production in January.
Three new mines are being developed in the immediate vicinity – two by junior companies Wesizwe Platinum and Platinum Group Metals, while the third is RBPlat’s Styldrift mine.
Brown said: “RBPlat is the key. If you control that ground, there are other opportunities in the surrounding area that could be pursued in the longer term although these are not vital for us.’
He confirmed one of the major benefits from acquiring RBPlat would be to defer the capital expenditure required to sink the three deep level shaft systems Implats is planning to maintain production from its flagship Rustenburg lease division.
The group’s capital expenditure budget at this stage is estimated at R29bn over the next four years.
Brown said: “Acquiring RBPlat would not do away with the need for those deep level shafts altogether but it would defer them, which would be positive for Implats from a net present value cash flow consideration.’
The other region where Implats is involved in major capex is Zimbabwe, where the group is spending $450m on the Phase 2 expansion at Zimplats.
Zimplats was – yet again – the most profitable of Implats’ mines in the six months to end-December, reporting an operating margin of 57% (previous comparable six months – 47% margin).
The Phase 2 expansion will take output from the current 180,000 ounces of platinum per year to 270,000oz/year. Implats management is now squaring up to the decisions required for implementation of the subsequent Phase 3 expansion.
Brown pointed out the Phase 3 expansion would be far more expensive because of the requirement for considerable surface infrastructure including a smelter and, possibly, a base metal refinery.
At present Zimplats produces metal in concentrate form which is sent to South Africa for smelting and refining.
Brown said” We have not yet come up with a definitive number on the capex, but it will be billions of dollars. What we are now looking at is to see if we can split the Phase 3 expansion into a number of smaller modules instead of going for a single “big bang’ approach.
“That way we can expand the operation while meeting the concerns of our shareholders through mitigating the investment risk. I believe we could be able to get up to another 120,000oz/year of platinum production from Zimplats without incurring huge amounts of capital expenditure.’
Brown said negotiations with the Zimbabwe government over indigenisation requirements and how changes to the country’s tax regime would affect Zimplats were ongoing.
The writer owns shares in Impala Platinum.