Implats rules out RBPlat bidding war
Platinum producer has already spent R9.2bn on increasing its stake to 35.3%
● Impala Platinum (Implats), the world’s third-largest platinum producer, has placed a ceiling on the price it is willing to pay to secure majority control of Royal Bafokeng Platinum (RBPlat).
Implats, which in January made a general offer of a R90 cash component and 0.30 Implats shares per RBPlat share, intends to obtain majority control.
It has already spent R9.2bn on increasing its stake in RBPlats to 35.3% and has provided R19.6bn in cash guarantees, representing the maximum cash payable under the offer.
“We have received support from the RBPlat management that [has] recommended the transaction to their board. It is not our intention to make variations to our offer or to get into a competitive price war with regards to the acquisition of any further shares,” CEO Nico Muller said this week after the release of the group’s financial results for the six months ended December.
Rival Northam Platinum surprised the market in November last year when it bought a 32.8% stake in RBPlat from the Bafokeng nation, sparking speculation there would be a battle for RBPlat’s assets. The acquisition bolstered Northam’s shareholding to 34.95% and the company has call options together with right of first refusal shares which could potentially take its stake up to 38.27%.
Mark du Toit, a founder of OysterCatcher Investments, said Northam Platinum had increased its stake in RBPlat because it wanted more platinum in its metals mix “and RBPlat fits with this strategy”.
He said the Implats offer to RBPlat shareholders — which is expected to expire in mid-June — was worth R177.45/share at the price the stock was trading at on Thursday.
“RBPlat shareholders can choose not to accept the offer and keep their RBPlat shares,” he said.
Du Toit said Implats’s acquisition of RBPlat would make sense because of the synergies that could be achieved by optimising
the infrastructure in place to mine the reef.
Other analysts agreed RBPlat was a natural fit for Implats — which says the takeover will boost its financial and operational performance — given that the assets are adjacent to each other. Christiaan Bothma, investment analyst at Sanlam Private Wealth, said the other big shareholder in RBPlat is the Public Investment Corp (PIC), which has just below 10% — making it a potential kingmaker in deciding whether Northam or Implats becomes the majority shareholder.
The PIC says it is a shareholder in all the
three companies, and “given the price sensitivity, it reserves its comments. However, the PIC supports any transaction that can demonstrate benefits for its clients,” said a spokesperson.
“But no matter who gets the majority, the asset will in all likelihood be run as a joint venture once the dust settles,” Bothma said.
As part of growing its portfolio, Implats four months ago approved plans to spend more than R8bn on expanding Zimplats and its base metal refinery.
It also gave the green light for a R5.1bn expansion of the Marula mine in Limpopo.
Implats COO Gerhard Potgieter said the extra smelting capacity in Zimbabwe provides an opportunity to increase thirdparty processing.
“The capacity does give us the opportunity to mine other people’s materials. One of the reasons we have agreed to increase the capacity … is that Zimbabwe is our playground, we know how to mine there, we know how to make money there. It just makes sense for us to also beneficiate there,” he said.
Bothma said the expansion means the group will be able to operate at higher levels than before, with extra ounces coming from Zimplats, Two Rivers and Marula. “However, the Rustenburg lease area, which is still more than 50% of production, does see many shafts close towards the end of this decade, which is why Implats is interested in next-door Royal Bafokeng. Royal Bafokeng has younger and shallower assets as well as good resources which can be developed in the future,” he said.
Du Toit said the expansion projects are relatively modest, adding only 300,000 ounces (about 10%) to annual production.
“It shows that management is taking a disciplined approach by approving targeted projects with relatively short payback periods,” he said.
Implats said this week it ended the six months to end-December debt-free and generated free cash flow of R15.1bn.
It cut dividends to 525c per ordinary share, down from R10 a year earlier.
The group reported production was down 5% year on year due to several issues, including safety stoppages, community unrest and Eskom outages.
Analysts say prices for its basket of metals are, however, still at high levels and the group continued to benefit from this.
However, six fatalities took place in the period under review, dealing a setback to its safety record.
For Muller, the most important issue to remedy in Rustenburg is labour relations.
“There has been a lasting affect from Numsa [National Union of Metalworkers of SA] attempts to recruit, in particular, our contract employees into their membership, that has had a material affect on the labour climate,” he said.
It is not our intention to make variations to our offer or to get into a competitive price war with regards to the acquisition of any further shares Nico Muller
Implats CEO