Northam: pushing investors for growth
Mvela Resources likely to heavily renegotiate deal
SHAREHOLDERS IN Northam Platinum will be wondering what they’ll have to pay Mvelaphanda Resources (Mvela), the empowerment outfit hoping to swap assets for new shares in the platinum company.
If a proposed transaction goes to plan, Mvela will assume control of Northam Platinum after swapping a 50% stake in its 120modd ounce Booysendal and another asset for a bunch of new shares.
It’s not specified what “the other asset” will be, but Mvela says it’s currently being negotiated between Lazarus Zim of Afripalm Resources, and Anglo American’s 74%-owned listed platinum subsidiary, Anglo Platinum.
One theory is that Afripalm will buy a stake or control of the Der Brochen platinum prospect adjoining Booysendal. As a condition of its buying a stake in Mvela, Zim’s Afripalm must offer new deals it gets to Mvela.
In any event, Northam shareholders, particularly minorities, must be fearful about the asking price for all this potential growth Mvela is offering. Remember, Northam is not a well-endowed company. It has a single lease-bound mine that suffers from dodgy geology. Although it’s not a deep platinum mine anymore, owing to efforts by other platinum producers to find new resources, it’s always been in the top quartile of cost producers in SA.
Mvela CEO Pine Pienaar wants to reas- sure Northam shareholders that the asking price “won’t necessarily be higher”. He speaks of wanting to establish a partnership. “We’ll go with a package offering to Northam. But this has to be a partnership or it’ll make further growth difficult.”
There’s some concern, however, that Northam will be punished by Mvela, which already has a 24% stake in the company. “Northam has nowhere to go (in terms of developing assets) and they’ll be hit hard for it,” says one analyst. Also, it’s worth noting just how much more expensive SA’s platinum resources have become amid a $1 000/oz plus price for platinum.
Lonmin has spent R4,5bn ($631m) since 2005 buying new sources of platinum after plans to diversify into other metals were met with resistance by UK shareholders. Impala Platinum recently announced it would spend R4,2bn ($583m) buying African Platinum.
In fact, both Lonmin and Impala have invested in resources that, several years ago, might have been considered risky new enterprises. The market is, however, encouraging new platinum production regardless of whence it comes.
“The best thing for investors is to play Northam through Mvela Resources,” says Mark Smith, an analyst for RBC Capital Markets in London. That’s because there’s a big chance Northam minorities will be severely diluted when having to pay for Mvela’s booty of growth assets.
Partnership already established. Pine Pienaar (left) and Lazarus Zim