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BUSH TELEGRAPH
Platinum dance
Tis the season to be doing Reason is he intends using
deals in the platinum sector,
with various mines strained as conventional mining methods
the platinum price sticks stub-
bornly below $US1,000/oz. And, when he re-opens the mine.
the canniest dealmaker of them
all is Northam Platinum Ltd chief Dunne says the reason the mine
executive Paul Dunne.
failed was because original own-
He’s pulled off three deals
over the past two years, all to er Xstrata tried to mechanise its
the great benefit of Northam
with the latest – the purchase of operations but the reef dips too
Eland Platinum from Glencore
– being so one-sided in North- steeply for mechanised mining
am’s favour that it amounts to a
steal. to be successfully implemented.
What makes this rampant There’s clearly more M&A ac-
M&A activity by Northam all the
more noteworthy is that it has tion to come as South African
taken place largely under the ra-
dar screen and been carried out platinum producers struggle
by the unlikely combination of a low-key
executive running a low-key company with thin or non-existent profit
which for many years was considered to
be one of the biggest “dogs†in the plati- margins as the dollar platinum
num sector.
price remains depressed while
That dubious accolade is now held
by Lonmin plc – the world’s third largest the rand is making the situation
platinum producer – which has been on
a downward spiral for the past five years worse.
and shows no signs of letting up.
Despite SA’s litany of political
Far more attention has been made to
the mega deals carried out by outspoken Sibanye’s Neal Froneman has shown a willingness to do woes and the continuing state
Sibanye Gold Ltd chief executive Neal deals in the downtrodden platinum sector of investment uncertainty in the
Froneman, who bought the Rustenburg mining sector because of gov-
division from Anglo American Platinum
Ltd (Amplats) and who, in December, an- Gold Fields prided itself on its deep- ernment’s negative attitude and policies,
nounced a $US2.2 billion deal to buy US
PGM producer Stillwater Mining Com- level mining technical expertise but as the rand is actually strengthening against
pany.
the group soon discovered platinum min- the US dollar which cuts mine profit mar-
That’s a huge deal. Sibanye may have
to raise around $US1.3 billion through a ing is very different to gold mining and gins even further.
rights issue to help fund it. In rand terms,
that amounts to around R16.5 billion for Zondereinde ran into serious technical The weakest link in the industry is
a group with a market cap of only R25
billion at present. problems, which hamstrung the compa- clearly Lonmin and what could happen
Northam’s deals have been far more ny for years. to that group – over which the South Af-
modest in scope but have all been
highly accretive – to use a term greatly The turnaround came over the past rican Government effectively now has
favoured by the dealmakers – and have
not strained the group’s finances. decade as Dunne’s predecessor – chain- negative control because of the 29.3%
Dunne joined Northam in 2014 after smoking, hard-bitten industry veteran equity stake held by the state-controlled
leaving Impala Platinum Ltd (Implats),
where he ran the Rustenburg mining Glyn Lewis – got a grip on Zondereinde Public Investment Corporation (PIC) – is
operations after an alleged bust-up with
then chief executive Terence Goodlace. while developing the new, shallow and the subject of intense conjecture.
Northam was originally set up by Gold
Fields Ltd in the mid-1980s through mechanised Booysendal operation in In the midst of all this industry uncer-
development of the Zondereinde mine
which was to be the deepest mine in the Mpumalanga province. tainty Implats continues to invest in a
platinum sector.
Dunne has built on the base Lewis pro- country where the regulatory and politi-
vided, with his first deal early in March cal situation is even worse – Zimbabwe –
2015 bringing in the mothballed Everest where subsidiary Zimplats is the biggest
mine from the troubled and now defunct platinum miner.
Aquarius Platinum for R450 million. Ev- Zimplats is putting in another $US260
erest was contiguous with the southern million to build the new Mupani mine
boundary of Booysendal and is also be- which will replace the existing Rukodzi
ing developed as a mechanised opera- and Ngwarati mines and maintain pro-
tion. It has also been swallowed up by duction at 260,000 ozpa platinum. This
Froneman. is despite the ongoing feud with the Zim-
Dunne followed up with his most ex- babwe Government over the terms of
pensive deal – the purchase of shallow indigenisation requirements for the mine
mineral resources adjacent to the Zon- as well as government’s latest land grab
dereinde mine from Amplats in October attempt to seize about half of Zimplat’s
last year for R1 billion. The resource will existing lease area.
extend Zondereinde’s economic life by The driving reason is the huge blue sky
10 years. potential for Zimplats if the country ever
He compensated for that financial “lar- comes right while Implats is not invest-
gesse†with the purchase of Eland Plati- ing any new capital in the country. All the
num for a mere R175 million from Glen- money for the new mine is being gener-
core but he’s effectively paying around ated by Zimplats itself.
R75 million because the deal includes a Brendan Ryan is a Johannesburg-based
suite of mechanised mining equipment mining write
at Eland, which Dunne says is worth
around R100 million but is non-core and
therefore a disposable asset.
AUSTRALIA’S PAYDIRT APRIL 2017 PAGE 7
