Zam­bezi Plat­inum list­ing a boon for Northam

Finweek English Edition - - IN THE NEWS - BY DAVID MCKAY

If be­ing forced to sell a hand­some slice of Northam Plat­inum in 2012 was a dark time for his Afripalm Re­sources, Lazarus Zim isn’t say­ing. “I never closed the doors at Afripalm. I’ve al­ways been here,” he said.

Tech­ni­cally speak­ing, Zim never left. The of­fices from which he speaks are still at the plum ad­dress in Sand­ton once oc­cu­pied by Afripalm Re­sources, the firm that joined hands with Mve­laphanda Re­sources around 2007 to take a 26% of Northam in one of the sec­tor’s ban­ner BEE deals.

Mar­ket con­di­tions, how­ever, made div­i­dend f low tough for Northam, with the re­sult that Ned­bank called on its loan to Afripalm which was un­der­pinned by the shares. Zim re­trenched staff at Afripalm and re­treated to Nige­ria dur­ing De­cem­ber 2012.

Now, how­ever, Zim is head of the Atius Con­sor­tium, a 5% share­holder in Zam­bezi Plat­inum and Northam Plat­inum’s new em­pow­er­ment ve­hi­cle. The con­sor­tium listed on the JSE on 11 May, a devel­op­ment that for­mally sig­nals the end of a two-year pe­riod of eco­nomic ex­ile for Zim.

“I stayed on as chair­man at Northam be­cause we de­cided to em­power the com­pany again,” said Zim. In fact, Northam had no op­tion but to look for f resh em­pow­er­ment a f ter t he depart­ment of min­eral re­sources in­sisted that there was no “once em­pow­ered, al­ways em­pow­ered” rule. It said in a dik­tat made public by Northam at the time that it f ind a new em­pow­er­ment part­ner, or else.

As it turned out, Zam­bezi Plat­inum be­came Northam Plat­inum’s 31.4% BEE part­ner, buy­ing into the plat­inum firm in a high-pro­file R6.5bn trans­ac­tion that also raised R4bn in ex­pan­sion cap­i­tal for Northam.

List­ing Zam­bezi Plat­inum now ef­fec­tively mon­e­tises the em­pow­er­ment part­ner’s stake, of­fered to the mar­ket in pref­er­ence shares, and which carry a 3.5% coupon rate, de­scribed by Zim as an at­trac­tive en­try point to Northam.

The cap­i­tal and BEE str uc­ture Northam has put to­gether comes at a price, how­ever. The hope is that Northam pays enough div­i­dends to en­able its BEE part­ners to re­pay Northam share­hold­ers for the 31.4% stake in 10 years’ time. So it has its risks.

“It does put pres­sure on Northam be­cause the pref­er­ence shares rep­re­sent an at­trac­tive en­try level,” said Zim. “Our chal­lenge is to make our share price more at­trac­tive than the pref­er­ence share,” he added.

The plan is for Northam to cap­i­talise on mar­ket weak­ness to buy up low­cost, mech­a­nis­able plat­inum de­posits. Zim said they ex­ist and that Northam plans to play. The com­pany has al­ready paid R450m for Aquarius Plat­inum’s Booy­sendal mine, which will add 250 000 ounces a year to out­put.

Dur­ing that time, Zim is hop­ing the plat­inum mar­ket will stage a turn­around. “The next three years the mar­kets will be sub­dued. At some stage it will have to rebuild – peo­ple will start buy­ing more cars and jew­ellery again.”

Zim sees no threat in depart­ment of trade and in­dus­try ad­just­ments to its own em­pow­er­ment score­card that broad­based em­pow­er­ment, and em­ployee share op­tions, which help make up the Zam­bezi Con­sor­tium, no longer count as di­rect own­er­ship.

“We cer­tainly hope that what we agreed with gov­ern­ment would stand,” said Zim. “It’s a ques­tion of not go­ing back­wards; you can­not be retroac­tive in my view. But this thing just came out yes­ter­day [6 May] so one needs time to study it prop­erly and en­gage with gov­ern­ment. What we have done has been what was agreed.”

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