Hand­ing over con­trol

Squeezed over its empowerment deals and still to come is rene­go­ti­a­tion of Modikwa

Finweek English Edition - - Companies & Markets - BREN­DAN RYAN

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

right now.”

right now.”

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

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