Dif­fi­cult to ap­por­tion blame

Finweek English Edition - - Letters - TM DUN­CAN

MVE­LAPHANDA RE­SOURCES agreed to trans­fer its 50% stake in the Booy­sendal joint ven­ture with An­glo Plat­inum to Northam in ex­change for R460m, to be paid by the is­sue of shares in Northam. That agree­ment is be­tween three sep­a­rate and dis­tinct par­ties.

The trans­ac­tion has not yet been fi­nalised. Mve­laphanda Re­sources has placed blame on An­glo­plat, al­leg­ing, in­ter alia, bu­reau­cracy. An­glo­plat has com­plained that Mve­laphanda’s black em­pow­er­ment cre­den­tials were at one stage in doubt. It’s dif­fi­cult to ex­actly ap­por­tion the blame for the de­lay in fi­nal­is­ing the agree­ment. Cer­tainly, both par­ties are to some ex­tent re­spon­si­ble.

The agreed con­sid­er­a­tion was to ap­prox­i­mate to US$1/oz of metal in the ground. From the out­set Northam, one of the three par­ties, has al­ways wanted the agree­ment to be fi­nalised on those terms and as soon as pos­si­ble. As late as Fe­bru­ary 2006, Northam’s CEO con­firmed that the con­sid­er­a­tion re­mained the same.

Northam has ex­cel­lent mine man­age­ment. We have more than R1bn cash on the bal­ance sheet. We have the nec­es­sary re­fin­ing ca­pac­ity. We aren’t re­spon­si­ble for the de­lay in fi­nal­is­ing the agree­ment. Northam has at all times been will­ing, able and, in­deed, ea­ger to fi­nalise the agree­ment and to pro­ceed with Booy­sendal.

Mve­laphanda Re­sources re­cently con­tended that given the av­er­age price paid for deals in the plat­inum sec­tor was more than US$13/oz it im­plies there’s some scope for rene­go­ti­a­tion of the con­sid­er­a­tion.

As it is, Northam has been sub­jected to po­ten­tial prej­u­dice by the de­lay in the Booy­sendal project. We’re look­ing at large cap­i­tal out­lays and it will ev­i­dently take four to five years to bring the mine to pro­duc­tion, whereas far less fea­si­ble projects are be­ing brought to pro­duc­tion far ear­lier in the cur­rent cy­cle of high plat­inum group metal prices.

Cer­tainly fair­ness would dic­tate that, if any changes, they should im­pact on Mve­laphanda Re­sources and/or An­glo Plat­inum and should not prej­u­dice Northam. There are ne­go­ti­a­tions be­tween Mve­laphanda Re­sources and An­glo­plat on other is­sues and prop­er­ties.

Hope­fully, they’ll have the good grace to re­flect the above in such ne­go­ti­a­tions and to fi­nalise the Booy­sendal trans­ac­tion on the pre­vi­ously agreed terms with haste.

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