Northam’s Dunne says lack of synergies with RBPlat “irrelevant” to control ambitions

A flag flies at the Northam Platinum Ltd. Booysendal platinum mine outside the town of Lydenburg in Mpumalanga, South Africa.

NORTHAM Platinum Holdings CEO, Paul Dunne described criticism his company had no operational synergies with Royal Bafokeng Platinum (RBPlat) as “irrelevant”.

“There has been discussion in the media where you make a big thing of Northam being 60 kilometres away [from the mines of RBPlat]. It’s absolutely irrelevant,” he said on Friday following the publication of the firm’s annual results.

“It might be relevant to other peoples’ valuations, but it is not relevant to us. Northam values the [RBPlat] assets on a standalone basis because of their inherent value,” he said.

“It’s an important statement I’m making. Why do we see value? It’s shallow, it is well capitalised, it is well engineered, and it’s young.” Sources of new production of PGMs would also become scarcer. “An ounce [of metal] is worth more tomorrow then it is today.”

Northam bought a 34.52% stake in RBPlat in November in a move that pulled the rug from under the feet of Impala Platinum (Implats) which had earlier announced it had entered into takeover discussions with RBPlat.

Implats subsequently unveiled a takeover offer in terms of which it now has just over a 38% stake, acquired at R90 per share in cash and 0.3 Implat’s shares per RBPlat share. Implats said it can prolong the life of its Rustenburg division which borders the mines of RBPlat – Bafokeng Rasimone Platinum Mine and Styldrift.

Northam, which operates Zondereinde at the top of the western limb of the Bushveld and Booysendal on the eastern limb, has options in RBPlat to take its stake to a similar shareholding, but it has not announced a takeover offer of its own. If it acquired all the option shares as of end-June at R137.38 per option share then Northam’s weighted average cost per RBPlat share would amount to R164.63 net of dividends declared.

Implats is due to report its year-end numbers on Thursday.

The outcome of the race for control of RBPlat – which Dunne said previously his company was desirous of concluding – may well be decided by the government-owned asset manager, the Public Investment Corporation (PIC) which is yet to decide whether it will sell its 9% stake in RBPlat to Implats’ offer.

Commenting on its plans for RBPlat, Dunne said there was “still some way to walk”. Northam would “keep its own counsel on this point for the moment”, he said.

It’s unknown the extent to which Northam is capitalised to make a bid for RBPlat. Its net debt rose to R16bn as of June 30 and shares in the company are 18% weaker year-to-date (Implats -13%; Anglo American Platinum -30%).

Alet Coetzee, Northam CFO, said the company stood to “quite dramatically” reduce its net debt in the current financial year provided the ramp up in sales guidance to between 800,000 to 910,000 oz platinum group metals was met and that PGM prices were stable.

“We are comfortable to use facilities to grow the business so it will depend on what company does in future. If we do nothing the net debt balance come down quite significantly,” Coetzee said.

Northam announced capex of some R5.4bn this year, R900m than forecast previously. Coetzee said the company “would definitely spend this” with the possibility of some risk on the upside depending on the rate of inflation. Northam’s unit cost inflation was about 19% for the 2022 financial year.