[miningmx.com] – NORTHAM Platinum said it had nearly completed the restructuring of its 2008 black economic empowerment (BEE) transaction after its partners, Mvelaphanda Resources (Mvela Resources) and Afripalm Resources, sold their shares in 2012 in order to avoid falling foul of bank covenants.
In an announcement to the Johannesburg Stock Exchange, the platinum firm said it had made “significant progress’, but it also warned the restructured empowerment deal could have a “material effect’ on its share price.
“The terms of the proposed HDSA [historically disadvantaged South Africans] transaction are being finalised and a detailed announcement in this regard will be released in the near future,’ it said.
The restructuring of the empowerment deal gives substance to fears that the principle of “once-empowered, always-empowered’ does not exist in the view of the Department of Mineral Resources (DMR).
The DMR said as much as revealed by Northam itself in August 2012 when it announced that its empowerment holdings had fallen to about 16% from 26%. Northam said at the time that the DMR had asked it to “urgently restore’ its BEE shareholding.
The terms of the transaction will be of huge interest to shareholders partly because it calls for an almost complete revamp of BEE in Northam because neither Mvela Resources, nor Afripalm Resources exist as BEE partners anymore.
Mvela Resources led by Tokyo Sexwale was delisted and wound up when he returned to politics, while Lazarus Zim, the chairman of Afripalm Resources, closed his company in December 2012. The banks “pulled the rug from under his feet,’ a market source told Miningmx.
Zim’s fall from grace was perhaps the most public failure of BEE yet in South Africa.
Once listed as one of South Africa’s wealthiest businessmen in 2010, with a net worth of R1.4bn, Zim told Miningmx that he intended to return to business. He is still chairman of Northam Platinum with the company only to hold its annual general meeting in November.
In terms of Northam’s initial BEE structure, Mvelaphanda Holdings had a 11.5% stake followed by Afripalm, (10.6%) and Toro Employee Empowerment Fund, which remains a partner, a 4% stake. Since Northam Platinum has to ‘sell’ 22% of the company to meet BEE laws, and based on a market capitalisation of R15.5bn, the deal would have a spot market value of R3.4bn.
Northam Platinum had initially planned to top up its empowerment partners by issuing
“A’ shares, a class of stock that would be funded from Northam’s free cash flow, but excluded from dividend payments.
Afripalm’s shares in Northam Platinum were acquired by the Public Investment Corporation (PIC), taking its overall stake in the platinum firm to 18.9%. It’s possible that a future empowerment deal could therefore involve the PIC.
In 2004, South African mining companies were given until 2014 to meet a number of empowerment criteria including that 26% of shares, or units of production in some cases, be sold on a willing seller-willing buyer basis to BEE companies.
The DMR is currently conducting an audit of mining companies with mines minister, Susan Shabangu, commenting recently that there had been a high level of compliance. Sibanye Gold CEO, Neal Froneman, said recently however that the audit would pose a number of problems and could lead to consitutional challenges to the empowerment legislation.
