The African Review: 24th November 2021

The African Review

24th November 2021

 

 

South Africa is the big granddaddy of African mining, thanks in no small part to its world-beating reserves of platinum group elements (PGEs).  This group of metals, which includes platinum, rhodium, iridium, palladium, ruthenium and osmium, are particularly useful for autocatalysts that help cars abide by ever-lowering emissions targets.  Despite the chip shortage that is strangling the auto industry at the moment, environmental demands have kept prices high. South Africa has ridden the wave, with its enormous Bushveld Complex, a magmatic intrusion that supplies around 75% of the world’s platinum, meaning miners are flush with cash.  One of the notable players in the PGE game, Impala Platinum (JSE:IMP, LSE:0S2J, “Implats”) was planning to use that windfall to acquire its long-desired rival, Royal Bafokeng Platinum (JSE:RBP, “RBPlat”) after negotiations announced on the 27th of October.  But those plans were stymied by the sudden announcement of a different deal that analysts have panned.

Mine structures at RBPlat's operations.
Image via Royal Bafokeng Platinum

That deal involved a smaller-time PGE miner, Northam Platinum Holdings (JSE:NHM) swooping in at the last possible minute with an offer for 32.8% of RBPlat (with an option up to 33.3%) for a rather remarkable 90% premium on the share price.  Implats’s offer was thought to be a much more believable premium of 35-37% per share, but Northam put paid to that with a deal that was apparently completed in a day.  This is a major blow for Implats, who have made at least six moves on RBPlat in the past.  The reason for Implat’s hankering is that its own assets in the sprawling Rustenburg complex are deep-level and aging, while RBPlat’s are right next door, mechanised, shallow and low-cost.  Plus, the combination of the two companies would overtake Sibanye and Anglo American Platinum and rival Russian giant MMC Norilsk Nickel in terms of attributable PGE output. There’s obvious scope for synergy between the two, and everybody could see it.

A worker assesses ore at Rustenburg.
Image via Sibanye Stillwater

Everybody, that is, except apparently Royal Bafokeng Holdings, RBPlat’s biggest shareholder and the investment arm of the Bafokeng nation, which is governed by King Kgosi Leruo Molotlegi and his advisors.  They had initially supported the Implats deal, but the high premium plus significant cash consideration that Northam offered caused them to switch sides, blindsiding RBPlat itself.  Spokeswoman Lindiwe Montshiwagae said the Northam deal was “unexpected” and that the reasons for it were best known to Royal Bakofeng Holdings themselves.  But this deal is not as tidy as an acquisition by Implats would have been: for one thing, it means minority shareholders miss out completely on any benefits, and for another, the extensive synergy between Implats’s and RBPlat’s adjacent assets is non-existent in Northam’s case.  Northam’s mines are nowhere near RBPlat’s, for a start.

Underground operations at RBPlat's mine.
Image via Royal Bafokeng Platinum

This agreement seems to be the product of an aggressive growth strategy that is being pursued by Northam CEO Paul Dunne, who suggested it provided a “strategic platform” for a medium-term combination of the two companies, and who also highlighted the different compositions of the ore produced by each miner.  RBPlat’s higher-platinum ores would be complementary to Northam’s palladium-rhodium richer products, he said.

On top of that, making RBPlat a shareholder of Northam would strengthen Northam’s Black economic empowerment credentials.  This thorny issue is in the media in South Africa at the moment, with the High Court in September striking down changes to the mining charter that were made in 2018 by Mines Minister Gwede Mantashe.  Those changes stated that the Black ownership target for South African mining companies would remain at 26% in perpetuity, meaning that companies who previously met the threshold but lost Black investors for whatever reason would specifically have to find new Black investors.  Now, the High Court has said that change can’t stand, and in a successful bit of negotiation, miners have “recommitted the industry to transformation” enough to convince Minister Mantashe not to appeal.

Black ownership of mining companies is a crucial issue in South Africa.
Image via Royal Bafokeng Platinum

The kind of betrayal experienced by Implats isn’t exactly what the South African mining industry needs right now.  Investment in mine development and exploration have fallen in recent years due to an environment of regulatory and legal uncertainty, which is a real shame for a country that was once the world’s top gold producer.  Now it seems that companies can be stabbed in the back from another angle as well.

In the Spotlight

Spotlight will be at Mines and Money London 2021, and we’ll be hosting SpotNight, an evening of friendly networking between mining professionals and an all-round fun shindig.  Have you been longing for some good mining chat while cooped up during the pandemic?  Then come and join us, plus senior figures from our wonderful sponsors Warrior Gold (TSXv:WAR) and Enduro Metals (TSXv:ENDR) from 17:30 on the 1st of December, close to the conference venue!  Prior registration is required due to corona regulations, so click here to secure your spot.

  • Find out all about mining in Slovakia!  Expert contributor Aaron has done a great write-up of the geology around projects owned by Prospech Mining (ASX:PRS) in this appealing jurisdiction.
  • Maybe Mexico is more your style?  For a seriously in-depth look at its geopolitical environment and major mining projects, check out this piece from Luke Holland.  Part two, covering junior activity, will be out soon!
  • Have you heard about the Prospector Portal, a new search engine for the mining industry?  Our interview expert Alex sat down with its founder Emily King to hear about her extraordinary background and innovations.
  • What’s happening in Newfoundland?  Callum Clark has insights into some of the most interesting juniors in this region with an Exploration Highlight.
  • If you’ve got an interest in the gold price (and who doesn’t?), have a look at Friday’s Spotlight Round-up to find out what’s driving it.

That’s your African Review for this month!  I’ll be in touch on Friday with another Round-up to end your week.

- Jane Lockwood

Jane Lockwood

View posts by Jane Lockwood
Jane Lockwood is an Australian geoscientist living and working in Germany. She holds a Master's of Earth Science (Advanced) from the Australian National University and has spent several years reporting on the junior mining industry for Spotlight Mining, as well as conducting social media management for junior mining companies.