‘Deal of a lifetime’
Sometimes it’s more sustainable to be a small fish in a larger empowerment pond
THE PROPOSED TAKEOVER of black empowerment miners Northam Platinum and Mvelaphanda Resources by Impala Platinum would enhance transformation while building a “national platinum empowerment champion” and one of South Africa’s biggest empowerment companies. So says Mvelaphanda Holdings, founding and major shareholder in Mvela Resources, which denies unethical business practice in reversing into Implats assets it recently bought from Implats’ largest competitor.
In August Mvela Resources bought Anglo Platinum’s 50% interest in the Booysendal platinum exploration project and the company’s 22% stake in Northam for R4bn in cash. After exchanging the whole of Booysendal for new Northam shares, Mvela Resources ended up with a 63% interest in Northam.
But the question on some investors’ minds is the palatability of Mvela Resources’ latest transaction with Implats – which directly transfers to a competitor an asset bought at a discount in order to advance empowerment and transformation. The proposed sale to Implats also flies in the face of Mvela Resources’ claim in September 2007 that the deal with Angloplat would help it “achieve a milestone in its longer-term strategic objectives by gaining control of an operating company”. No sooner had it gained control of Northam than it entered into negotiations for its sale and allowed itself to be swallowed up by Implats in the process.
However, Mvela Holdings CE Mark Willcox doesn’t see the deal in that light. “Mvela Resources paid top value at the time for the Booysendal asset, and the transaction with Implats enhances transformation and empowerment.” Willcox compares the deal with African Rainbow Minerals’ Patrice Motsepe and Exxaro’s Sipho Nkosi, who also bought assets cheaply and injected them into their respective companies. “Those turned out to be very value-adding empowerment deals and very sustainable,” says Willcox. He says Angloplat is “supportive” of Mvela Resources’ transaction with Implats – “subject to their rights” being protected.
“Angloplat did a very fair deal with us. There isn’t much black capital going around but they got R4bn cash from us,” says Willcox. The transaction “will create a national platinum empowerment champion” where the Royal Bafokeng Nation (RBN) joins hands with Mvela as the largest shareholders in the company.
The empowerment partners will own a joint initial 17% in the expanded Implats; but Implats also stated it will do a followup deal to take black shareholding north of 20%. “It’s a coup for empowerment to create a national platinum asset in the form of Implats,” says Willcox. He adds Mvela Resources has a right to make money, as it took a major risk when it bought Booysendal as the platinum price could have gone against it. Platinum sprang from around US$1 200/ oz in September 2007 to more than $2 000/ oz and stayed above $1 700/oz until two months ago. At the time of writing it was around $1 000/oz.
More importantly, the Implats transaction will result in a “sustainable transfer of value and transformation from board level right throughout the asset,” says Willcox. He believes the Implats deal is a culmination of Mvela’s endeavours with empowerment.
Mvela Resources deputy chairman Bernard van Rooyen says Angloplat did a “deal of a lifetime with us and earned their empowerment credits for it”. Angloplat will still retain those credits. Says Van Rooyen: “We believe it’s Implats’s vision to be a company that overreaches empowerment in the legislative sense. We also want to do the maximum we can do for empowerment.”
Already in retirement territory, Van Rooyen is happy to have been able to “try to transfer” his skills and intellectual knowledge to the main players in the Mvela empire.
Willcox says one major aspect of the deal is its sustainability and enhancement it offers to transformation. “On our own we couldn’t develop Booysendal as quickly, but Implats has the resources to help us do that,” says Willcox. He isn’t worried about the loss of control over the assets. “In mining it’s sometimes more sustainable to be a small fish in a big pond than being a big fish in a small (empowerment) pond.” (See story on page 46.)
Culmination of endeavours. Mark Willcox