Northam Platinum intends to gain control of Royal Bafokeng Platinum (RBPlat) after acquiring a 34.68% shareholding in the company last year in line with its long-term growth and diversification strategy.
Northam acquired the stake from Royal Bafokeng Investment Holding Company in November — at a time when rival Impala Platinum (Implats) announced plans to take full control of RBPlat.
“We desire to control the asset. Whether we are able to or not is not yet determined.” Northam CEO Paul Dunne said on Thursday at the company’s financial presentation for the six months ended December.
RBPlat was a once in a lifetime opportunity, given an ore body containing 68-million ounces [of platinum group metals], a significant proportion of which was less than 700 metres deep, Dunne said.
“This is very shallow in today’s industry terms. Extraction rates are high at 75% and, importantly, the UG2 [the type of reef] is largely virgin. Putting it simply, all the rhodium, iridium and ruthenium is yet to be mined”.
Dunne said Northam was already in in a strong position. “The strategic holding at 35% represents something that, if I can say in plain English, is the silver medal.”
Also on Thursday, Implats bought a further 1-million shares in RBPlat, taking its shareholding to 37.62% and underscoring its intention to gain to control of the smaller rival.
Chantal Marx, the head of investment research at FNB Wealth and Investments, said Northam’s pursuit of RBPlat was puzzling as the two companies don’t have any operational synergies, while there clear opportunities for co-operation between Implats and RBPlat, both of whom have operations in the Rustenburg area.
Marx said the takeover regulation panel ruled this week that Northam is under no obligation to make an offer to minority shareholders and the company seemed happy with that.
“This could imply that they do not wish to take out the entire business or that they want to wait so that they won’t be bound by the price they paid for the Royal Bafokeng Investment Holdings’ stake.
“In any event it is very complicated, and Impala would not want to give up their stake in the business. Royal Bafokeng is currently trading under a mandatory offer from Impala,” she said.
Consulting mining analyst René Hochreiter said the Public Investment Corporation (PIC), which owns 10% of RBPlat, is the “playmaker” in determining control of the company.
We desire to control the asset. Whether we are able to or not is not yet determined
— Northam CEO Paul Dunne
“It depends on what happens with the PIC. Are they going to sell? Who are they going to sell to? Obviously both parties need 50% plus one [share] to get a majority and if they do not get that I’m afraid RBPlat will continue trading as a listed company.”
Northam’s production for the six months ended December was largely unchanged at 351,359 ounces of 4E [platinum, palladium, rhodium and gold], despite community unrest, absenteeism and high employee turnover at the Zondereinde operation due to Covid-19, load-shedding, and the sabotage of Eskom transmission infrastructure that hit production at the Booysendal mine.
“We were without power for four days because an Eskom switching station was effectively hijacked. You can imagine the high degree of fixed costs and no production for four days,” Dunne said.
Northam grappled with higher costs, but was boosted by a 16.8% increase in sales to R13.9bn, with operating profit increasing to R5.9bn from R5.2bn a year earlier.
Seleho Tsatsi, an investment analyst at Anchor Capital, said Northam experienced a difficult six months. .
“Their production volumes came under pressure due to operational challenges, like higher Covid-19 absenteeism. In addition to that, cost inflation is very strong at the moment which is pressuring unit costs not just for Northam but the wider industry,” he said.
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