Royal Bafokeng Platinum (RBPlat) was kicked into play in October last year when Impala made a cash and shares offer for 100% of its shares.
RBPlat responded to what it saw as a lowball offer by agreeing to sell 32.8% of its shareholding to Northam, with an option to extend this offer to 33.3%.
That clearly got Impala’s attention and forced it to sharpen its pencil. It came back with a better offer of R150 for each RBPlat share, made up of R90 cash and 0.3 ordinary shares in Implats per RBPlat share. That was a 22% premium to the RBPlat share price as at November 24, 2021, when the deal was first proposed.
Implats meanwhile went out and got institutional shareholders in RBPlat to pledge 24.52% of the shares to it.
From a low of around R20 at the depth of the Covid crash in March 2020, RBPlat was trading this week above R160, an eight-fold increase in value. The timing of the deal for RBPlat shareholders appears near perfect.
RBPlat has a market cap of about R29 billion, and at the halfway stage in 2021 Implats had cash of around R24 billion.
Sasfin Securities deputy chair David Shapiro says the Implats offer made most sense, as it has the cash and the muscle to carry the project forward.
That didn’t stop Northam putting up a valiant fight for the last known shallow high grade Merensky resources and reserves still available for mining in South Africa. In December it had acquired about 35% of RBPlat.
Though Northam made a higher cash offer (R180 per RBPlat share), the Implats offer makes more sense from several aspects.
The real sweetener for RBPlat shareholders is the part-payment in Impacts shares and the prospect of a generous dividend flow in the years ahead.
The acquisition is vital for Implats, which has just 10 years left on its existing mining operations.
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.
RBPlat and Implats have a long-standing relationship, underpinned by royalty agreements signed in 2010 covering ore mined by Implats on RBPlat properties. RBPlat earns royalties equivalent to 17.5% of gross platinum group metals (including gold, nickel and copper) on certain of its properties mined by Implats at its 6, 8 and 20 shafts.
In a circular to shareholders last week, RBPlats advised that the 6 and 8 shaft royalty agreement was renegotiated in 2013 and is linked to market conditions and the profitability of the Implats Rustenburg operations.
Implats now pays Royal Bafokeng Resources, a wholly-owned subsidiary of RBPlat, a royalty that is based upon a factor that is linked to the Implats Rustenburg operations’ gross margin with a minimum of 5% and a maximum of 25% of gross PGM, gold, nickel and copper revenue. RBPlat anticipates earning royalties from the 6 and 8 shaft agreement up to 2024 and from the 20 shaft agreement for approximately 30 years.
Should the mandatory share offer be implemented and Implats acquire more than 50% of RBPlats, the latter will then be delisted.
Listen to Fifi Peters’s interview with Impala Platinum group corporate relations executive Johan Theron (or read the transcript here):