Northam and Mvela Resources announce the terms of the Booysendal transaction
Transaction creates the only fully independent, HDSA owned and controlled, integrated PGM producer, with substantial life
Mvelaphanda Resources Limited (Mvela Resources) and Northam Platinum Limited (Northam) announced today that agreement has been reached on the acquisition by Northam of the entire Booysendal platinum project (Booysendal) on the Eastern Limb of South Africa’s Bushveld Complex, including full control of the resultant metals from mine to market.
The agreement follows a broader Black Economic Empowerment (BEE) transaction between Mvela Resources, Afripalm Resources, and Anglo Platinum, which resulted in:
- Mvela Resources acquiring Anglo Platinum’s 50% interest in Booysendal
- Mvela Resources acquiring Anglo Platinum’s entire 53.1 million shares in Northam (22.4% interest)
In terms of the agreement, Northam will acquire 100% of Booysendal, and secure full operational control of the project for a consideration of 125 million new ordinary shares to be issued to Mvela Resources. This equates to a market value of R6.25 billion.
Explaining the strategic rationale of the transaction for Northam, CEO Glyn Lewis said that the acquisition of this premier resource on the eastern Bushveld is a company transforming transaction for Northam.
“The opportunity of acquiring Booysendal, with its resource of some 112 Moz (3PGE+Au) and an extended life of mine, is one that Northam can ill afford to miss. The addition of this large, low-cost project to our asset base provides Northam with a much-needed and certain avenue for growth, improving the quality of its resource base, and with the potential to double its current output from some 325,000 oz to approximately 650,000 oz (3PGE+Au) in the near term. And, at a cost of around US$7.84 per PGM ounce (R50/share and R7.12/US$), the acquisition price is lower than most recent acquisitions in the platinum sector and certainly for comparable resources of this size and quality.”
On implementation of the transaction, Mvela Resources will increase its stake in Northam to 63.4%, bringing impeccable BEE credentials to Northam. Furthermore, this strategic alliance with Mvela Resources brings further growth and value-enhancing opportunities to Northam, whose prospects are currently constrained.
Commenting on the value of the transaction for Mvela Resources, CEO Pine Pienaar said, “With the successful conclusion of this transaction, Mvela Resources has achieved a significant strategic milestone by gaining control of a robust operating company. Northam currently operates one of the most technically challenging PGM mines, and has for many years demonstrated its mining and metallurgical expertise. This expertise and capacity, along with its access to world-class refining technology, provides an as yet unrealised competitive advantage and sustainable platform for growth.”
Booysendal is a well explored area on the Eastern Limb of the Bushveld Complex, with measured, indicated and inferred resources on the Merensky and UG2 reefs of 33 million oz (3PGE+Au) and 79 million oz (3PGE+Au) respectively. A technical committee has already completed a significant amount of work on the project, and a pre-feasibility study is likely to be completed by the end of the first quarter of the 2008 calendar year. Lewis describes the underlying reef as largely conformable. Initial technical studies suggest potential mine construction and development could start by the end of calendar 2009, after the completion of a bankable feasibility study, with first production beginning in 2010, ramping up to steady-state levels of some 240ktpm in 2013.
Total capex for the project is estimated at R4.8bn, to be funded from a combination of company cash retentions, and debt and/or equity financing, depending on market conditions prevailing at the time.
Implementation of the transaction will be subject to a number of conditions precedent, including Northam shareholders agreeing to waive their right to receive a mandatory offer from Mvela Resources (so as not to dilute its BEE shareholding), and normal regulatory approvals required for a transaction of this nature. It is anticipated that these approvals will be obtained by the end of calendar 2007.
Mark Willcox, CEO of Mvelaphanda Holdings said; “This is a further step in the strategic alignment of Mvela Resources and Northam. The initial investment in Northam in 2000 created the platform for additional value accretive transactions, which have resulted in the company growing its market capitalisation from R200 million in 2000 to over R11 billion today. Booysendal is a world-class growth asset in the platinum sector, and the development of this asset should create significant value for shareholders of Northam and Mvela Resources, including Mvelaphanda Holdings”.
Lazarus Zim, Chairman of both Mvela Resources and Northam, concluded; “This is a landmark transaction in the platinum sector, resulting in the creation of the fourth largest, independent and black-controlled South African PGM producer, controlling the precious metals pipeline from mine to market. The Mvela Resources/Northam group has got the right mix of cash flow from current operations and future organic growth opportunities to ensure its position as a meaningful player in the platinum industry for many years to come”.
For Mvela Resources
+27 11 325 5323
+27 83 453 4014
For Northam Platinum
+27 11 880 3924
+27 82 895 0698