Nkwe investors fight for higher payout for stake
After years of boardroom battles and slipping off SA’s mining radar screen, the struggle for Nkwe Platinum’s 44-million ounces of platinum group metals (PGMs) is nearing its end — but with a final twist.
Events for Australia’s Sydney-listed Nkwe have seldom been simple, failing to bring its resources to account despite a bankable 2012 feasibility study into building a mine and concentrator at Garatau near Steelpoort in Limpopo.
Nkwe is on the cusp of being delisted from the Australian Stock Exchange by the majority owner, China’s state-owned and Shanghai-listed Zijin Mining Group, but there is deep unhappiness among a group of 420 minority shareholders representing 22% of the shares who are fighting a battle in the Bermuda high court for a higher payout for their stake.
Nkwe is registered in Bermuda. Zijin will take over Nkwe entirely and the assets held by Nkwe, essentially the three farms on the Eastern Limb of the Bushveld Igneous Complex, the world’s largest known PGM deposit, will go to Gold Mountains (Bermuda) Investments, which will then be wholly owned by Zijin.
Mineral resources minister Gwede Mantashe and his department have to approve the transfer of the mining rights held by Nkwe to Gold Mountains.
Lawyers for the 420 shareholders have written to departmental officials to inform them there is a legal dispute before the court in Bermuda about the valuation of Nkwe’s shares.
Zijin, which owns 60% of Nkwe, made an offer of 10 Australian cents (7.1 US cents) per share in July 2018. However, the 420 shareholders said this offer is far too low.
In an independent study into the value of the assets in October 2018, SRK found the fair value is 12c-26.3c, with a midpoint of 19.2c.
Under Bermudan law, if there is a dispute by minority shareholders about the valuation of their shares, a process called an appraisal action can be lodged with the supreme court of Bermuda to make a finding on a fair value.
However, true to form, matters are not that simple, with Zijin saying it will take all the minority shares, paying out the non-dissenting minority shareholders 10c per share and paying the dissenting shareholders only after the Bermudan court has decided on a value.
The hearing, which started in October 2018, could take up to a year to be concluded. The 420 shareholders could approach the court to force Nkwe to pay the 10c along with the payment to other minority shareholders, topping it up once the court completes its appraisal.
If Zijin can claim 100% ownership of Nkwe it can then apply to Mantashe for the transfer of mineral rights to Gold Mountains, the lawyers for the 420 shareholders contend.
“What Zijin is seeking to achieve is a form of expropriation of assets unprecedented in any legal jurisdiction,” said Rael Gootkin from Werksmans Attorneys. “Ownership of shares cannot be claimed without paying for them.
“The department of mineral resources should not be misled into believing the amalgamation has been completed unless and until evidence has been provided by Zijin that each of the minority shareholders who own shares in NKP (Nkwe) have been paid their 10c per share for those shares,” he said.