S.Africa’s Northam launches $600 mln black empowerment deal

by Reuters 0

Northam Platinum sees interim operating loss

[DATA NHM:Northam Platinum]’s share price fell 2.25 per cent in early trade to 35.00 rand.

South African companies are required to meet targets on black ownership and hiring under the government’s policy of black economic empowerment, or “BEE”, designed to address the inequalities of the apartheid system that ended in 1994.

Northam said it will issue over 112 million new shares, representing 22 per cent of its issued share capital, to an entity owned by black investors. The investors will also buy existing shares worth 9.4 per cent, the company said.

The investors will pay 41 rand a share, a 15 per cent premium to Northam’s closing price on Wednesday.

(READ MORE: Northam Platinum’s 2014 FY performance dips)

Unlike many BEE deals, where black investors acquire their stakes via loans, Northam’s investors will fund their deal by issuing preference shares for cash to two of Northam’s own shareholders, the Public Investment Corporation and Coronation Fund Managers.

The deal, worth 6.6 billion rand or 600 million dollars, will see Northam get a cash injection of 4.6 billion rand.

It will also bring its total black ownership to 35.4 per cent, exceeding the government’s minimum requirement of 26 per cent for mining companies.

(WATCH VIDEO: Northam Platinum’s Zondereinde mine out of commission for up to six weeks)

The agreement includes a ten year “lock-up period” meaning the investors will retain their stake for at least a decade.

The black investors include community trusts and a group led by KB Mosehla, the chief executive of black investment company Mosomo Investment Holdings.