[miningmx.com] – AQUARIUS Platinum has lent 2.9% of its shares to
subsidiary, Aquarius Platinum Investments (API), in an effort to preserve the
shareholdings held by its empowerment partners.
The UK-listed firm said it had allotted 14 million shares, equal to 2.9% of its shares in
issue, for 41.75 pence per share, or £5.8m (R79m).
This was after its cornerstone empowerment shareholders – Savannah, Chuma and
Malibongwe – released 7.4% of their combined stake in Aquarius Platinum earlier this
year in order to meet bank obligations.
The shares lent to API will be used by it as security to the empowerment firms’ banks.
Aquarius Platinum expected that its empowerment partners would have to effectively
reduce their shareholdings in the company yet further in order to meet bank
obligations. The lending of the shares, because it is between related companies, is
cash neutral, Aquarius Platinum said.
Were the shares to vest with the empowerment companies, it would take their
shareholding in Aquarius Platinum SA back to about 9%, but short of their previously
combined shareholding of 13%.
“The board of Aquarius has considered the implications of these sales of the BEE
partners’ shares and of further potential sales, and resolved that it is in the interests
of Aquarius, and in line with its ongoing commitment to complying with the BEE and
regulatory framework in South Africa, to assist the BEE partners to preserve their
remaining shareholdings in Aquarius,’ it said in a statement to the JSE.
It’s worth noting that the South African government requires its mining companies to
have sold 26% of equity to empowerment partners by 2014, although companies have
achieved this in different ways with some choosing to issue shares while others have
sold “units of production’.
Failing to meet the empowerment laws could result in mining companies losing their
mining licences.
The issue has been subject of some confusion, however, as it was initially thought that
mining licences were issued to compliant companies on a “once-empowered, always-
empowered basis’.
Aquarius Platinum’s transaction is particularly ominous for South Africa’s platinum
sector because it begs the question: how many other companies, especially in the
platinum sector where about half is loss-making, have empowerment partners in
danger of breaking bank covenants.
Northam Platinum said in August that it had been instructed by Government’s mineral
resources department (DMR) to restore the shareholdings previously held by its
empowerment partners – Mvelaphanda Holdings and Afripalm Resources – after they
had handed over their shares in lieu of debt and interest repayments.
This transaction is subject to a shareholders’ vote.
The root cause of the problem is the decline in the cash-flow of platinum companies
and the subsequent fall in the value of the shares that were used to guarantee many
of the empowerment transactions completed in the previous eight years.
A significant increase in the wage bill of South Africa’s platinum sector, a possible
outcome if the spate of strikes are to be resolved, will only intensify the pressure on
empowerment companies as share prices in platinum companies decline.
