Zambezi Platinum listing a boon for Northam
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.”