The battle for Royal Bafokeng Platinum gets white hot

Written by Ciaran Ryan. Posted in Journalism

Impala Platinum and Northam square up to each other. From Moneyweb.

RBPlat’s assets are among the most sought-after real estate in the PGMs sector. Image: Supplied
RBPlat’s assets are among the most sought-after real estate in the PGMs sector. Image: Supplied

Northam Platinum and Impala Platinum (Implats) are locked in a battle for control of Royal Bafokeng Platinum (RBPlat), though Implats needs this deal more.

Just south of Sun City, RBPlat mines platinum group metals (PGMs) in the Merensky and UG2 reefs on the Boschkoppie, Styldrift and Frischgewaagd farms in the Rustenburg area. These sites account for the last undeveloped Merensky reef on the Western limb of the Bushveld complex.

RBPlat’s assets are the only known significant shallow high grade Merensky resources and reserves still available for mining in South Africa, and this makes them some of the hottest real estate in the PGMs sector.

Implats kicked RBPlat into play in October when it made a cash and shares offer for 100% of RBPlat’s shares.RBPlat’s major shareholder Royal Bafokeng Holdings seemed underwhelmed by this offer, and two weeks later announced it had agreed to sell 32.8% of its shareholding to Northam, with an option to extend this offer to 33.3%.

Read:
Royal Bafokeng Platinum rockets almost 20% on proposed Implats buyout offer

Northam outfoxes Impala Platinum with R17bn Royal Bafokeng deal

This prompted a counteroffer by Implats at R150 a share which, while lower than Northam’s R180 a share, did not account for Implats’s strong dividend flow which would reward shareholders over the longer term.

Read: Implats renews Royal Bafokeng bid, valuing miner at R43.4bn

Implats secured agreements to acquire 24.52% from RBPlat institutional shareholders. The offer is made up of R90 a share cash and 0.3 ordinary shares in Implats per RBPlat share – representing a 22% premium to RBPlat’s closing price of R121.92 on November 24.

RBPlat’s share price hit an all-time high this week of R140, fuelled by the auction now underway for its prized platinum assets.

There’s no question that Implats needs the deal more. Crucially, RBPlat’s operations are contiguous with those of Implats.

Nico Muller, CEO of Implats, told the media this week that this would create a range of operational synergies such as shaft expansions and higher metal off-take.

Implats expects a successful takeover of RBPlat to yield upwards of 600 000 ounces of 6E PGMs (platinum, palladium, rhodium, ruthenium, osmium and gold) a year and extend the life of its Rustenburg Mines by 10 to 15 years.

With just 10 years of production left on these mines, this life extension is vital for Implats.

Battle justified

The fact that RBPlat runs a mechanised, Merensky-rich orebody feeding what is expected to be robust future demand for platinum, nickel and copper, provides a compelling case for the takeover bid by both mining houses.

Explaining the benefits of the deal to RBPlat shareholders, Implats says it provides them with exposure to a global portfolio of PGM assets and a toll refining business designed to capture the full PGM value chain through integrated processing facilities, including wholly-owned smelters as well as base and precious metal refineries.

The deal would also allow RBPlat shareholders to benefit from regional diversification across the Eastern Limb of the Bushveld Complex in SA, augmented by assets in Canada and Zimbabwe, and the planned expansion of processing capacity across the group.

In a statement issued on Monday (November 29), RBPlat notified shareholders of Implats’s intention to make a general offer for the RBPlat shares it does not already own. Implats’s offer is conditional on its achieving a minimum 50.1% in RBPlat.

RBPlat’s position

RBPlat CEO Steve Phiri, responding to the latest offer from Implats, says the focus remains on delivering value to all stakeholders, including shareholders, employees and communities.

“We will continue to engage as appropriate with all bona fide parties in the pursuit of creating value for all our stakeholders. Implats’ offer and the recent acquisition of RBPlat shares by Northam are testament to the value inherent in this business and to the hard work that our teams have put in. We will continue to engage with all shareholders as we ultimately pursue the delivery of value.”

RBPlat has assembled an independent board to review and consider the offer made to all shareholders.

“At this stage the board does not have a view or recommendation of the offer but, in the interest of shareholders and potential value creation, has agreed to facilitate the offer,” said RBPlat in a statement.

Ironically, should Implats succeed in its bid to acquire RBPlat, this will cap a decades-long campaign by the Bafokeng nation for a share of the world’s richest PGM deposits which lie beneath tribal land.

The Bafokeng waged a long and painful battle against Implats and the former Bophuthatswana bantustan for mining royalties, which it succeeded in obtaining under former Implats CEO Steve Kearney, and then converted those royalties into Impala shares.

Ciaran Ryan

The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and Lewrockwell.com, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.