Mvela CEO Mark Wil­cox tends to dis­agree

How soon be­fore ENRC ups its stake in plat­inum min­ing group?

Finweek English Edition - - Front Page - MARC HASEN­FUSS march@fin­

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

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