ENRC buys Northam stake for R2.2bn

[miningmx.com] — LSE-listed ENRC will buy a 12.2% stake in Northam Platinum from majority shareholder Mvelaphanda Resources for R2.2bn cash, clearing the way for the long-awaited unbundling by Mvela.

KAZAKH resources group Eurasian Natural Resources Corporation (ENRC), one of the world’s biggest ferrochrome suppliers, will pay R50 per Northam share in cash for 44 million shares, leaving Mvela with a 50.5% stake in Northam.

Miningmx reported on 4 January that ENRC was in talks about making a bid for Mvelaphanda Resources to get its hands on the majority Northam stake.

In December, ENRC – which is listed on the London Stock Exchange – acquired 96% of Central African Mining and Exploration (Camec) in a deal which valued Camec at around $950m.

The ENRC deal effectively clears Mvela’s debt of around R2.2bn and opens the way for an unbundling of its assets, which includes five percent of Gold Fields, the stake in Northam, shares in diamond producer Trans Hex and joint ventures with platinum miner Lonmin and diamond junior Tawana.

The ENRC transaction effectively takes the pressure off Mvela to sell its remaining stake in Gold Fields to repay debt so it could begin the unbundling process, said investor relations exective James Wellsted.

Mvela was reluctant to sell Gold Fields shares, which were not at a price at which the holding company was happy to let them go.

Asked whether ENRC would buy further Northam shares from Mvela, Wellsted said: ”
We’ve not had those discussions yet. This was an opportunity to settle our debt in one shot and that’s what we’ve done.”

ENRC will fund the purchase out of its cash holdings and expects the transaction to be completed in May this year.

“The interest in Northam is a strategic opportunity to invest in one of the largest PGM miners in the world at a time when platinum is expected to benefit from increased demand and to face supply constraints,’ said Felix Vulis, ENRC’s CEO.

Northam, which operates a single deep-level platinum mine with annual production of 300,000 oz of PGM, is working on a new project at Booysendal, which is a shallower long-life deposit with one of the largest untapped platinum ore bodies in South Africa, with resources of 100 million ounces.

“The transaction provides an opportunity for the diversification of Northam’s shareholder base,” Northam CEO Glyn Lewis said in a statement.

“And, after Mvela Resources completes its proposed unbundling, Northam’s free float will increase significantly, improving the liquidity and ease of investing in Northam shares in the market,” he said.

Northam told the market in February it would spend R340m on early work at its R3bn Booysendal platinum project ahead of the start of construction in July this year.

The first phase of the project could lift Northam’s sales by 130,000 oz of PGMs a year, hitting full production in August 2014. The second phase will add a further 115,000 oz a year, bringing the Booysendal contribution to Northam to a total of 245,000 oz.

Northam is investigating financing options and could include debt for Booysendal.

ENRC operates six divisions, including ferroalloys, iron ore, alumina and aluminium, energy and logistics.