Impala Platinum to buy Northam for $2.47bn
OHANNESBURG –
Impala Platinum, the world’s No 2 miner of platinum group metals (PGMs), is to offer ZAR 21bn (US$2.47 bn) to acquire all of Tier II PGM miner Northam, 62% held by Mvelaphanda Resources, “to create a South African controlled platinum champion”. Impala is also bidding to acquire the balance of Mvelaphanda Resources.
The deal values Northam at just over ZAR 51 a share; the stock closed at ZAR 43.50 on Thursday. Impala is proposing to settle 70% of the purchase of Northam in new Impala shares, and the 30% balance in cash. Upon completion, Northam shareholders would receive 24.50 Impala shares for every 100 Northam shares held, and the cash equivalent of 10.50 Impala shares.
The cash value of the 10.50 Impala shares will be determined by the 30-day volume weighted average price (”VWAP”) of an Impala share on the day that all conditions precedent to the deal are met. Impala has structured a similar mix of shares and cash in the offer to acquire the balance of Mvelaphanda Resources.
The moves from Impala follows yesterday’s announcement that Anglo-Swiss diversified miner Xstrata had effectively delayed its acquisition of Lonmin, a Tier I PGM name. On 6 August 2008, Xstrata announced intention of a hostile GBP 33 a share cash bid for Lonmin, effectively valuing Lonmin at around USD 10bn.
In the days prior to Xstrata pulling its intention to make a full bid, Lonmin traded as low as GBP 21 a share, indicating the market’s disbelief that the bid would be formalised. In a further announcement yesterday, Xstrata said it had acquired additional Lonmin shares, such that it now holds around 25% of the entity, ranked the No 3 platinum group metal (PGM) miner in the world, after Anglo Platinum and Impala.
PGM prices have plummeted over the past six months, by 50% and more. Analysts at RBC Capital Markets argue that with the “basket” PGM price – calculated mainly from the prices of platinum, palladium, rhodium and gold – now hovering around USD 900/oz (against USD 2,000/oz six months ago), the logic of Xstrata pulling its bid made sense: “We expect Xstrata to acquire Lonmin over time. Our ‘back of the envelope’ value for Lonmin is approximately GBP 15, against the current market price of around GBP 19″. Lonmin’s market value has more than halved to USD 4.6bn in the past two months.
Impala had announced on 12 September that it was in talks with Mvelaphanda Resources and Northam. The news followed weeks of buzzing activity around the PGM sector; the day before Impala’s announcement, Aquarius Platinum said it was “considering options for participating in South African platinum industry consolidation”, adding, however, that “the options under consideration do not include a possible offer by the company for Lonmin”.
One of the most desirable assets in the overall story is Booysendal, recently acquired by Northam. Northam, crucially, ranks as the only PGM miner with smelters, outside of the Big Three. Booysendal has boosted Northam’s PGM ounces-in-the-ground, massively, to a total of 120m, ranking fourth only to Anglo Platinum, with 725m, Impala, with 415m, and Lonmin with 166m. Aquarius holds a relatively modest 71m, but is highly regarded for excellence in management, and powerful cash generation.
Tags: Platinum
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