After a series of acquisitions  of Royal Bafokeng Platinum (RBPlat) shares, Impala Platinum’s (Implats) shareholding in RBPlat now stands at 37.93% of the RBPlat shares in issue with Northam Holdings owning 34.5% of RBPlat.

Impala Platinum (Implats) made a general offer to the shareholders of Royal Bafokeng Platinum (RBPlat) to acquire all the issued ordinary shares in the capital of RBPlat it does not already hold.

This article will cover;

  1. Tug of war between Implats and Northam
  2. Why Implats wants RBPLat, and
  3. History of Impala and Royal Bafokeng Nation and Royal Bafokeng Platinum.

Let’s get some key abbreviations out the way.

  • Amplats: Anglo American Platinum
  • Implats: Impala Platinum
  • PGMs: platinum group metals
  • RBH: Royal Bafokeng Holdings
  • RBN: Royal Bafokeng Nation
  • RBPlat: Royal Bafokeng Platinum

Background of RBPlat is as follows. In 2002, Anglo American Platinum formed a 50:50 joint venture with the Bafokeng Royal Holdings through its wholly owned subsidiary, Rustenburg Platinum Mine.

The 50:50 joint venture then became known as the Bafokeng Rasimone Platinum Mine Joint Venture (BRPM JV). In 2010, the Bafokeng, through their investment vehicle Royal Bafokeng Holdings (RBH), increased their participating interest to 67%, gaining operational control of the BRPM JV.

A restructuring of the JV took place in 2009, paving the way for the listing of RBPlat. When RBPlat listed on the JSE in 2010, it was the 1st community-owned company to do so and remains the only community-owned company listed on the JSE.

In Dec 2018, RBPlat acquired Amplats’ 33% interest in the joint venture for R1.863 billion, becoming sole owner of the assets.

For year ended 31 December 2020, Royal Bafokeng Platinum declared its maiden final dividend of R1.5 billion (R5.75 per share). In September 2021, RBPlat declared a maiden interim dividend of R1,5bn (R5,35 per ordinary share from the profits accrued during the 6months ended 30 Jun 2021).

Mid 2021, Royal Bafokeng Platinum broke into the 10 South African mining companies ranked by their respective market cap. A ten-year-old baby on the JSE has done well.

Now here is where the tug of war between Implats & Northam begins.

Implats is a leading producer of platinum group metals (PGMs). Implats has six mining operations and its toll refining business, Impala Refining Services. Its mining operations span the Bushveld Complex in South Africa, the Great Dyke in Zimbabwe and the Canadian Shield and include Impala Rustenburg, Zimplats, Marula, Impala Canada’s Lac des Iles, Mimosa and Two Rivers.

November 2021, Implats announced that it intended to make a general offer to RBPlat shareholders. However, they were beaten to it by Northam Holdings.

Northam Holdings then acquired 32.8% of Royal Bafokeng Platinum for R17.2bn from Royal Bafokeng Holdings. Northam settled R17bn by issuing of 34.4m Northam shares to Royal Bafokeng Holdings which is 8.7% of Northam and R8.6bn in cash. R3.6bn of the R8.6bn cash was paid upfront and the balance is payable before end of September 2022. Northam spent an average of R162.70 to up its stake to 34.95%.

Implats was serious about getting its hands on RBPlat. Why is Implats serious about this acquisition? 

  • RBPlat is a mid-sized PGM producer with mining and concentrating operations contiguous to Implats’ Impala Rustenburg portfolio on the Western Limb (which has 68% of SA PGM supply). Its mineral reserve inventory is notable due to its size and quality, with a mechanised, Merensky-rich orebody, aligned to robust future demand for platinum, nickel and copper. 
  • Implats’ acquisition of RBPlat offers compelling strategic, operational and financial benefits for all stakeholders through securing a significant Western Limb production base that enhances and entrenches the region’s position as the most significant source of global primary PGM production.
  • Some operational synergies are; potential to share business and technical services across operations, potentially transfer a portion of the concentrate offtake agreement at RBPlat to Impala Refining Services in the fullness of time and seek to extract additional processing synergies by targeting the treatment of chrome, enhancing concentrate recoveries, optimising concentrator capacity and utilisation and assessing the potential for tailings retreatment.
  • RBPlat’s operations are situated in the only major shallow platinum group metals (PGMs) reserves still available for mining in South Africa.

December 2021, Implats then went shopping for RBPlat’s shares. Implats got a 24.5% stake in RBPlat by buying stakes from minority shareholders including Coronation Asset Managers, Abax Investment, Allan Gray and Ninety One. Implats then increased its stake to 32.26% by buying shares owned by Allan Gray and a small portion of the PIC’s stake in RBPlat which reduced the PIC’s stake to 9.69% down from 11.4%.

The battle to the magical 35% was on. This is when the mandatory offer kicks in and whoever owns 35% or more can make an offer to buy out the other shareholders. Section 123 of the Companies Act No 71 of 2008 deals with the requirement to make a mandatory offer to purchase the remaining shares of a public company when one shareholder holds 35% or more of the issued ordinary shares in the capital of the company.

As at 7 January 2022, Implats held 102,059,866 RBPlat shares, representing 35.31% of the shares in issue. Implats then announced a firm intention to make a general offer to the holders of issued ordinary shares of RBPlat for Implats to acquire all the issued ordinary shares of RBPlat, other than treasury shares, that

it does not already hold and that it is willing to pay a consideration of R150 (funded entirely from Implats’ own cash resources and guaranteed facilities) per RBPlat share, consisting of;

  1. a cash amount of R90 per RBPlat share and
  2. 0.30 ordinary shares in Implats per RBPlat share for the shares it does not already hold.

November 2021, Implats had said that If RBPlat declares a dividend, the cash component of R90 per share will be reduced by an amount equal to the RBPlat dividend on a rand for rand basis.

On 8 Mar 2022, RBPlat released its audited annual results for the year ended 31 Dec 2021 and declared a final cash dividend of 535 cents per RBPlat share. After reviewing the financial results, Implats confirmed that the cash component of R90 per share will not be reduced as a result of the dividend declared by RBPlat. Accordingly, the cash portion of the R150 offer will remain at R90 to be paid by Implats.

How did Implats build up its stake in RBPlat to 37.93%?

  • 28 February 2022, Implats acquired a further 0.35% of the RBPlat shares in issue which increased its shareholding in RBPlat to 35.66%.
  • 18 March 2022, Implats acquired a further 0.75% of the RBPlat shares in issue which increased its shareholding in RBPlat to 36.41%
  • 23 May 2022, Implats acquired a further 0.21% of the RBPlat shares in issue which increased its shareholding in RBPlat to 37.83%.
  • 25 July 2022, Implats acquired a further 0.10% of the RBPlat shares in issue which increased Implats’ shareholding to 37.93%. 

Now what is the difference between the Implats and Northam offer?

Northam’s offer of R180 a share for a 32.8% was to only one shareholder, being Royal Bafokeng Holdings with no indication that Northam will make an offer of R180 per share to all the other shareholders of RBPlat.

Implats’ R150 offer is being made to all shareholders as Implats seeks to acquire all the shares it currently doesn’t own. 

The Implats mandatory offer remains the only offer to RBPlat shareholders.

Implats said that on a 100% basis the transaction value for RBPlat was R43bn and R28bn on a 65% basis.

History of Impala and Royal Bafokeng Nation and Royal Bafokeng Platinum.

Implats and Royal Bafokeng go way back. Implats and Royal Bafokeng Nation share a very long and complicated history that involved, among many things, a royalties-equity swap that led to Royal Bafokeng Nation owning 13.2% of Implats.

Here is where the complex relationships start. The Royal Bafokeng Nation owns and inhabits +-1 200km2 of land in the Rustenburg Valley, which is home in the North West Province. Royal Bafokeng Nation holds various mineral and mining rights and investments mainly in PGMs and ferrochrome.

In 2003, a Notarial Mineral Lease was entered into between the Royal Bafokeng Nation, Minister of Land Affairs and Impala Platinum. Royal Bafokeng Nation leased to Impala Platinum the exclusive right of prospecting and/or mining for certain minerals in, on and under the Lease Area.

The terms of the Notarial Mineral Lease provided for payment of the initial royalty and an increase in the annual royalty to Royal Bafokeng Nation of 22% of taxable income from the Lease Area, subject to a minimum of 1% of the gross selling price of PGMs from the Lease Area.

Simultaneously with the entering into of the Notarial Mineral Lease, Royal Bafokeng Nation acquired a 1.3% stake in Implats for R98.2m which it paid in cash. Royal Bafokeng Nation also gained the right to nominate a director to the board of Implats.

In 2007, Implats decided that it will pay all royalties due and payable to Royal Bafokeng Nation for the 31-year period from July 1, 2007 to the last day of the lease period being 30 June 2038, valued at R10.6 billion.

Impala Platinum paid an amount of R10,58bn to the Royal Bafokeng Nation in cash in respect of all royalties outstanding. R10.58bn was calculated using an exchange rate of $1:R7.50, a platinum price of between $900/oz-$1 000/oz and a palladium price of between $250/oz-$300/oz.

As this was a royalties-equity swap, Royal Bafokeng Nation used the R10.58bn to subscribe for 75 115 200 shares in Implats. Royal Bafokeng Nation owned 1.3% of Implats at the time of this transaction. The complexity didn’t stop there.

Royal Bafokeng Nation, through Royal Bafokeng Impala Investment Holding (RBIIH) and Royal Bafokeng Tholo Investment Holding (RBTIH), subscribed for the 75 115 200 (12.1%) Implats shares as follows:

  • RBIIH: 56,556,208 Implats shares and
  • RBTIH: 18,558,992 Implats shares.

Based on a closing price of R1,290 per Implats share as of 22 Sept 2006, the value of the shares subscribed for by RBIIH and RBTIH was R12.1 billion. Difference between R12.1bn and R10.6bn was a discount of R1.5bn which was reflected in Implats’ income statement as a BEE charge.

The net effect of the royalties-equity swap was that Impala Platinum discharged its obligation to pay royalties periodically to the Royal Bafokeng Nation from 1 July 2007 and the Royal Bafokeng Nation obtained 13.4% of the fully diluted issued ordinary share capital of Implats.

Implats had a conditional right to repurchase from the Royal Bafokeng Nation 2.5m of the 75.116m Implats shares. Royal Bafokeng Impala Investment Holding (RBIIH) and Royal Bafokeng Tholo Investment Holding (RBTIH) were locked in couldn’t sell any of the shares before 31 May 2014.

Royal Bafokeng Holdings has since sold its entire 13.2% stake in Implats.

  • 2015 – Implats’ share placement dilutes RBH’s stake to 11.3%,
  • 2016 – RBH sells 5% stake of Implats and 2018 – RBH sells remaining 6.3% stake in Implats and used the proceeds to reduce its debt by 30%.

For the year ended 31 Dec 2020, the 40.2% stake in Royal Bafokeng Platinum was the only direct exposure Royal Bafokeng Holdings had in mining. RBH sold a bit of that 40.2% between Jan-Oct 2021. Now with the sale of the 32.8% stake to Northam, their exposure has decreased to 3.3%.

The tug of war has been interesting to watch.The South African Competition Commission has recommended that the South African Competition Tribunal approves the transaction involving Implats and RBPlat, subject to certain conditions relating to public interest considerations, which had largely been agreed upon between Implats and the Competition

Commission. The proposed transaction is still subject to the approval of the Competition Tribunal. 

The below factors have made PGM players attractive;

  • Total platinum demand is projected to increase by 7% to 7.25Moz in 2022, an increase of 250koz compared to pre-pandemic levels,
  • Platinum automotive demand is estimated to grow by 420koz to 3.1Moz (gross, incl. non-road), with vehicle production on the way to recovery but impeded by the ongoing semiconductor chip shortages,
  • China VI legislation for heavy-duty vehicles and the wider use of platinum-loaded gasoline autocatalysts is expected to boost demand,
  • Industrial requirements for platinum are expected to increase by 5% to 2.4Moz, driven by glass capacity expansion and growing silicone demand,
  • Total rhodium demand is forecast to exceed 1.1Moz this year, as light vehicle production increases following semiconductor chip shortage constraints in 2021, leaving the market with a slight surplus,
  • Palladium automotive demand is forecast to rise by 4.3% to 7.9Moz in 2022, recovering from the 2020 level of 7.4Moz but still below 2019 levels,
  • Total palladium demand is expected to grow by 2.5% to 9.68Moz.

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