Lonmin to buy out Amplats at Pandora
Lonmin will buy Anglo American Platinum’s stake in their joint venture Pandora mine for between R400m and R1bn.
|||Johannesburg - Platinum mining company Lonmin said last Friday that it would buy Anglo American Platinum’s (Amplats) stake in their joint venture Pandora mine for between R400 million and R1 billion.
The acquisition of Amplats’ 42.5 percent stake, which is subject to regulatory approval, will give London-based Lonmin a 92.5 percent stake in the mine as Pandora was a 50 percent Lonmin-owned and managed joint venture with the Bapo ba Mogale Traditional Community. Northam Platinum is left with the remaining 7.5 percent through Mvelaphanda Resources.
Amplats said the deferred consideration would be based on the Pandora E3 operation cash flows on a mine-to-ore basis as set out in the ore sales agreement.
“If you take out Anglo Platinum from the decision-making process, it can be easier to progress things for the asset,” said Peter Mallin-Jones, an analyst at Peel Hunt.
For Amplats, the transaction brings it closer to its goal of offloading its labour-intensive mines to focus on mechanised mines. The company completed the sale of the Rustenburg mines to Sibanye Gold last week, with just one mine left unsold.
“Amplats was not going to go for the development plans for the asset because it had alternate assets to focus on,” Mallin-Jones said.
Free cash flow
A recovery in platinum prices and cost cuts helped Lonmin post a narrowed annual loss in May.
Lonmin said it would pay the consideration on an annual basis for a period of six years by distributing 20 percent of the operation’s free cash flow, while also allowing Amplats the use and full operational control of Lonmin’s Baobab concentrator for three years with an annual rental fee, estimated in future at R46m.
Lonmin said the acquisition of Amplats’ stake would allow it to consolidate its position in this relatively shallow and high-grade mineral resource providing an attractive option for development by its subsidiary, Eastern Platinum, in the short and longer term.
Chris Griffith, Amplats’ chief executive, said this was another milestone in the repositioning of their portfolio.
“We believe we have concluded a beneficial transaction for both parties, while also securing a sustainable future for the Pandora mine,” Griffiths said. “The benefits of operational control over Baobab will enable us to unlock further value at Mogalakwena mine and achieve cost savings.”
Lonmin shares fell 10 percent in London, while Amplats shares were down 3.16 percent.
On the JSE, Lonmin shares closed 11.78 percent lower on Friday at R34.14. Amplats declined 3.58 percent to R322.81.
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