ROYAL Bafokeng Platinum (RBPlat) is to take full control of Bafokeng Rasimone Platinum Mine (BRPM) in an agreement with its joint venture partner, Anglo American Platinum (Amplats), in which it will pay R1.86bn for Amplats’ 33% stake – a portion of which will be settled through the issue of about 9.79 million RBPlat shares.
At RBPlat’s current share price it would raise roughly R200m from its rights issuance with the balance settled through a loan to be re-paid over three-and-a-half years. RBPlat could settle some or all of the outstanding amount through a further issue of further shares. It also retained the option of clawing back shares.
In April, RBPlat decided not to proceed with a R944m right issue planned for the then purchase price of R846m for the Maseve mine owned by Platinum Group Metals, a Toronto-listed firm that had suffered financial distress. RBPlat said at the time that its capital commitments elsewhere were more pressing and that the transaction would be financed from debt. Shares in RBPlat are some 25% lower since that announcement.
However, the R1.86bn price tag was a 15% discount to the “see-through” value of the BRPM joint venture as based on RBPlat’s 30-day volume weighted average share price as of July 4. The consideration would also take account of Amplats’ contribution in terms of its portion of capital commitments between now and the completion of the transaction, taking the total deal amount to R2.11bn. RBPlat already owns 67% of the BRPM joint venture.
RBPlat said the buy-out of Amplats’ stake in BRPM was a logical step given its comfort with the orebody and the fact that it planned to expand and renew the resource by means of the adjoining Styldrift 1 and Styldrift 11 projects.
“The transaction therefore provides RBPlat with the ability to increase its attributable resource and reserve base in an asset that it knows and understands (given that it already controls the asset), with relatively low implementation risk …”, it said in a statement to the Johannesburg Stock Exchange.
Chris Griffith, CEO of Amplats, said RBPlats had made the offer. However, the transaction must also be seen as a further clean-up of Amplats’ exposure to non-controlling mining risk whilst retaining the rights to process at least 50% of the platinum group metal (PGM) concentrate from the joint venture for its life of mine.
The existing concentrate agreement between RBPlat and Amplats would be replaced with a new one which would allow RBPlat to retain its termination right on 50% of BRPM JV concentrate every five years, with the earliest termination being in August 2022. Amplats would also retain board representation on the joint venture structure whilst the loan account on the balance of the consideration was outstanding.
“The disposal of interest in the BRPM JV will allow Amplats to focus its capital allocation into its own-managed mines and projects,” said Griffith in a statement.
As with many other platinum producers, RBPlat had a tough previous financial year with full year headline share earnings coming in lower at 54.6 cents compared to the previous year’s 86.7c/share. There was also an impairment on good will, described the company at the time of its full-year earnings announcement in March as “a legacy issue”.
