Mvela CEO Mark Wilcox tends to disagree
How soon before ENRC ups its stake in platinum mining group?
THE INCREASINGLY AUDIBLE notion that black economic empowerment is getting a bad rap may well be plausible. Witness the warm tones in the media when Pallinghurst Resources recently convinced Dutch pension fund Algemene Pensioen Groep to commit US$250m to its mining ventures in South Africa.
But last week’s R2bn deal by empowerment mining giant Mvelaphanda Resources to sell a significant minority stake in platinum mining group Northam to Kazakhstan-based Eurasian Natural Resources Corporation (ENRC) drew cold comment from certain quarters. Johannesburg’s Sunday Times suggested the Northam/ENRC deal asked more questions than it answered and claimed Mvela was SA’s most prominent empowerment failure.
There was also an inference the ENRC deal was struck in order to bail out prominent empowerment shareholders – not only Mvela but also Lazarus Zim’s Afripalm – from significant debt constraints. Mvelaphanda Holdings CEO Mark Wilcox disagrees strongly with the ‘failure’ assessment. “You have to understand the Mvela timeline, especially to grasp how Mvela and Afripalm have added value at Northam over the years.”
Wilcox says when Mvela took control of Northam, the group had no more than seven years of life left in its mines. “We acquired additional land from Anglo American and then bought into Booysendal with support of Department of Minerals and Resources director general Sandile Nogxina.”
“Today – after the unbundling – we will have a platinum mining group with no debt, 26% BEE ownership, 100 years of life and probably the best platinum mining team under Glyn Lewis. We’ve seen Northam grow in value from around R1bn ten years ago to around R20bn today. No one can call this a failure.”
Wilcox stresses ENRC conducted a “heavy” due diligence. “Their decision to invest $300m is a huge vote of confidence in Northam, the country and also in the role of BEE.” He says Zim played a key role in the “hard negotiations” securing the shareholding in Booysendal that Northam initially didn’t own. “Lazarus and Afripalm created huge value for Northam and Mvela.”
Essentially, proceeds from the ENRC deal will allow Mvela to clear its debt and follow through with a long-awaited exercise to unbundle its underlying investments.
Apart from Northam (where the stake will reduce from 66% to 50,1%), Mvela’s other interests include a 38% holding in Gold Fields, a 25% stake in diamond miner Trans Hex and 50% in the Dwaalkop platinum venture (which could over time be housed in Northam).
The biggest question facing Finweek is how soon before ENRC takes a tilt at gaining control of Northam? ENRC isn’t renowned for taking minority stakes in mining ventures and surely it’s only a matter of time before the company is tempted to up its interest markedly. One analyst notes: “It (ENRC) hasn’t bought this stake to sit on.”
Naturally, empowerment shareholders who retain their shares in Northam may well score if ENRC is determined to take control of Northam – especially if the new strategic shareholder starts adding value to operations. But what ENRC could bring to the party, operationally speaking, is establishing profitable synergies between platinum mining and chrome mining.
MARK WILCOX No one can call this a failure