Handing over control
Squeezed over its empowerment deals and still to come is renegotiation of Modikwa
AFRICAN RAINBOW MINERALS (ARM) could win control of the Modikwa Platinum mine, currently a 50:50 joint venture with Anglo Platinum (Angloplat). That possibility follows last week’s restructuring of the former 50:50 JV between Angloplat and Royal Bafokeng Resources (RBR) over the Bafokeng Rasimone Platinum Mine (BRPM).
Significantly, both BRPM and Modikwa were excluded from the overall conversion of all the “old order” mining rights owned by Anglo American into “new order” mining rights granted at end-April this year.
Reason given at the time by Jacinto Rocha – deputy director-general at the Department of Minerals and Energy (DME) – was that there was a “technical” problem. Rocha added there were “no outstanding issues to be resolved” while CEO Cynthia Carroll had said previously (in February) that Anglo “had done enough to win conversion”.
But the revision to the BRPM JV makes it look like that wasn’t the case. Asked whether Angloplat had been pressured to restructure the deal due to empowerment considerations, Royal Bafokeng Holdings (RBH) CEO Niall Carroll replied: “We do think the final structure has advanced black ownership in the industry and will have a positive impact on any empowerment credits Angloplat may be entitled to.”
Angloplat investor relations manager Trevor Raymond says giving up control of BRPM wasn’t a condition for achieving conversion. He adds it shouldn’t be assumed the Modikwa deal will be restructured in a similar fashion.
But ARM executive “Stompie” Shiels confirms the issue of control of the Modikwa JV is one of the items under discussion with Angloplat. Other issues include the off-take agreement through which Angloplat smelts and refines the mine’s production. Shiels declines to go into specifics, commenting: “Everything is at the sensitive stage
“Everything is at the sensitive stage
In terms of the restructured BRPM deal, Angloplat will sell its stake in the JV down to an effective 43%. The BRPM mine will be controlled by RBH through a company – dubbed Newco at this stage – that will be listed on the JSE and will own 67% of the BRPM JV.
Niall Carroll says the new structure creates an independent, black-controlled platinum group metals (PGM) producer that will be a platform for the consolidation of “midtier regional PGM assets”.
The off-take agreements between major platinum groups Angloplat, Impala Platinum and Lonmin and the juniors have been a bone of contention with the DME. The majors claim they’ve facilitated the entry of various junior mining companies into the business through them. However, some DME officials reckon they’re being used by the majors to retain control over sales of the end-product metals.
In terms of the BRPM JV, the existing sale of concentrates agreement will remain in place and Angloplat will continue to smelt, refine and sell all metals produced. But RBH will have the right from 2012 to buy 50% of any refined metal arising from BRPM from Angloplat at market prices.
If Angloplat does renegotiate the Modikwa JV, giving ARM control, then it will be the fourth major project over which it has surrendered control to empowerment partners. The first two – announced late last year – were the deals to sell Booysendal to Mvelaphanda Resources and to put control of Lebowa Platinum Mine and the associated Ga-Phasha project into Anooraq Resources.
Analyst views are split on whether Angloplat is being pressured unfairly by Government into relinquishing control of those assets through the deals to obtain conversion of its old order rights.
Positive impact on empowerment credits. Niall Carroll