NORTHAM Platinum bolstered its heavily worked balance sheet today which it has put towards building a 70% stake in Zambezi Platinum, its empowerment vehicle.
The platinum group metals (PGMs) company, which announced record financial year-end numbers in August, said today it had issued R1.33bn in domestic notes. The note programme enables Northam to sell shares to the tune of R15bn. It has issued about R7.1bn so far.
“This continues to support Northam’s growth strategy and simultaneously allows the company to accelerate the return of value to shareholders,” said Paul Dunne, CEO of Northam in a statement.
Northam has preferred the repurchase of the preference shares in Zambezi rather than paying out dividends to shareholders, arguing that it was a comparable form of shareholder return.
Zambezi Platinum subscribed for Northam shares in 2015 as part of an empowerment scheme. These shares were issued at R41 per share with Northam agreeing to pay the difference if the value of Northam shares fell below that level when the preference shares matured in 2025.
Apart from removing the guarantee risk, Northam argues that in buying back the preference shares, it will reduce the dividend expense and cut shares in issue in the event the preference shares holders in Zambezi Platinum elect to redeem their shares for ordinary shares in Northam.
Today’s book-build was oversubscribed by 33%, Northam said, adding that the proceeds would be “… applied towards replenishing Northam’s cash reserves utilised in the course of Northam’s ongoing acquisition of preference shares in Zambezi Platinum (RF) Limited”.
Northam also completed a R492.1m note switch, which effectively extends the maturity date of certain notes issued previously, and maturing on 26 February 2021.
The company said on November 2 that it was in discussions to “accelerate” by around four years the maturity of the Zambezi Platinum empowerment transaction.
Terminating the Zambezi Platinum transaction, if that is to be Northam’s intention, could pave the way for traditional dividend payments by the company.
Full-year normalised headline earnings ended June 30 were 150% higher year-on-year at R3.4bn. Share earnings increased more than 100% to 676.3 cents.
