Northam: push­ing in­vestors for growth

Mvela Re­sources likely to heav­ily rene­go­ti­ate deal

Finweek English Edition - - Companies & markets - DAVID MCKAY

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

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