Community takes Lonmin to court over empowerment deal

THE WORLD’S third largest platinum company, Lonmin, has been taken to court by disgruntled community members in a bid to pull the plug on a R564 million empowerment transaction signed last year.

The Bapo ba Mogale community, on whose land Lonmin operates, has a 3.4 percent stake in the company.

Yesterday, disgruntled members of the Bapo traditional community announced that they had launched an application in the North Gauteng High Court last week to review several decisions in the transaction.

Lack of consultation

At a press briefing in Johannesburg yesterday, Kholisile Dingiswayo, a member of the liaison committee, blamed Lonmin for lack of consultation, a claim that Lonmin has denied.

“The application announced (yesterday) makes it clear that a lot of traditional norms, customs and procedures were overlooked by government, politicians and officials alike, as they aligned themselves to profit from transactions on our land,” Dingiswayo said.

Government’s mining charter of 2004 compelled mining companies to sell 26 percent of their assets to previously disadvantaged individuals by the end of last year to address apartheid wealth imbalances.

Dingiswayo also blamed the company for preferring to lend Shanduka, which does not have links with the community, R3 billion to buy 18 percent of the company. “Today, the same 18 percent is used as economic strength in the merger between Shanduka and Pembani Investments valued at about R11bn and not one member of the community stands to play a role in this,” he said.

“A community of just 39 000 was tricked into buying just 2.4 percent of Lonmin’s shares with everything it had, including its land. This is unacceptable,” Dingiswayo said.

The decision to hand over ownership of the Bapo Mining Company, which owned 7.5 percent in Lonmin’s joint venture with Anglo American Platinum was problematic, he said.

Dissolution

“No due diligence report was provided to the community as to the actual value of the company, as well as asking the community (shareholders and land owners) to resolve the dissolution of this company as required by the company’s act,” Dingiswayo said.

As part of the deal Lonmin paid the Bapo R564m to waive its rights to royalty payments from the producer’s two operating companies, together known as Lonplats, in addition to a R100m cash payment that was made to the community.

Peter Major, an analyst with Cadiz Corporate Solutions, said that empowerment obviously sounded great – and looked good on paper.

“But we all know reality, that is, economics, cyclical commodity prices and human failings and frailties have a way of making reality very different from ‘what was on paper’. And this is the load that the poor Lonmin shareholders have had to carry.

“The company was giving away and financing this thing as if it was a government and a bank in one – and not a high cost, high risk mining company,” Major said.

Lonmin spokeswoman Sue Vey said the community had overwhelmingly supported the deal, which had been in the pipeline for years.

She said the deal was aimed at helping the community.

“The intention was to assist the community in structuring a transaction to reduce the community’s reliance on the inevitably declining royalty payments,” Vey said.

“Holding shares in Lonmin, which is listed in London and Johannesburg (JSE), has the potential to deliver future annual revenues that will persist as long as the company remains in business,” Vey said.

Lonmin shares on the JSE yesterday fell 0.11 percent to close at R26.22.