Red tape strangles Eastplats mine deal
IN August, Business Day said in this column that it feared Eastern Platinum (Eastplats) was running into the same regulatory headwinds that Aquarius Platinum had encountered and that scuppered a $37m sale of two mines.
It would appear those fears have been realised.
Eastplats was to be bought by China’s Hebei Zhongbo Platinum (HZP) for $225m, provided conditions were met by August 7.
The conditions included South African regulatory approvals, and when these were not forthcoming by the target date, Eastplats pushed the completion date to endDecember this year.
The problem was that HZP never signed an amended agreement to give effect to the decision.
The Chinese company’s largest shareholder, Beijing Hehe Fengye Investments, says it will not support a deadline extension, effectively scuppering the deal. While there may be some HZP shareholder battles at play, delays in securing regulatory approvals lie at the heart of the deal’s failure.
Assuming Beijing Hehe, whose approval is needed for HZP to continue the transaction, remains opposed to the deal, it is impossible to know what SA has lost in terms of a fresh investor restarting mines and creating jobs.
The stalling of this deal, the second in a year, must surely deliver a wake-up call to the authorities to encourage investment rather than discourage it with bureaucracy.
ESOR’S shares are trading at about a fifth of the tangible net asset value of 152c per share that is reflected on financial statements at the end of August. That’s not too surprising. The brittle construction sector is in that kind of space where prospects, order books and value are being heavily discounted. But developments at Esor do bear watching — especially as SA’s water challenges intensify.
Directors’ commentary accompanying the interim results said Esor Pipelines and newly formed Esor Sanitation continued to perform solidly and within budget. Directors said the Western Aqueduct project was progressing well, while the eThekwini sanitation contract was completed.
Long-term contracts were secured by Esor’s pipe services division at Steelpoort and the O6 pipeline. At the end of August, the water-linked assets were buoyed with an order book of R604m.
A further filling of the order book in the second half would feed into theories on why two investment entities have recently taken advantage of a bombed-out share price to build significant positions in Esor.
Kamal Parabhu Natha has built a stake well over 30%, while Marcel Golding’s Geomer Investments has snapped up a nearly 6% stake. Pipe dreams … or a tap on strong longerterm cash flows?