Northam Platinum emerges in decent shape after bruising two-year battle

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

ALL’S well that ends well in the two-year battle between Impala Platinum and Northam Platinum? That would seem to be the conclusion, for now.

One happy outcome is that the spectacle of Northam as discontented minority in Royal Bafokeng Platinum (RBPlat) – the company for whom Implats (successfully) and Northam (unsuccessfully) bid – will be avoided.

There was no love lost for Northam when Miningmx spoke to Nico Muller, Implats CEO. “The competing process as far as I’m concerned has destroyed any possibility of us having cooperation,” Muller said in June when asked if Northam could play an active role in RBPlat as a minority 34.5% shareholder.

The two companies fought fiercely over RBPlat, with Northam standing accused by Implats of delaying tactics. Muller thinks Northam exploited the lack of ‘put up or shut up’ clause in South African takeover regulations and that it launched objections with the takeovers and competition authorities, and the JSE, in order to frustrate its offer.

“He” said Muller of Paul Dunne, Northam’s CEO “will never be on the board, not him or any Northam representative will ever be on that board”.

Northam would have been a constant stone in the shoe of Implats. It’s also questionable whether Northam’s long-term interests in RBPlat would have been fully served with Implats at the driving wheel. Instead, Muller will have Northam as a 3.3% shareholder in terms of Northam’s acceptance of Implats’ offer for RBPlat.

Interestingly, shares in Northam gained 6% in the wake of its acceptance of Implats’ offer while the latter’s share price fell. This reflects what’s most dear to investor hearts – cash.

Implats’ cash pile will be halved to about R9bn in order to pay the cash component of its RBPlat offer to Northam. Northam, however, will move into net cash and has, additionally, raised the prospect of paying a dividend.

There may be some questions in the long-run about Dunne’s strategy in respect of RBPlat, and the expense of having to raise relatively expensive debt to bolster the firm’s balance sheet during the two-year battle for RBPlat, but the company is finally positioned to reward shareholders. As one of the few (Tharisa is another) PGM companies with real production growth locked in, it stands to be premium-rated.