Press release: Northam signals firm intention to acquire remaining RBPlat shares

Announcements 2022

: 09 Nov 2022

An offer to acquire all or a portion of the remaining RBPlat shares for R172.70 per RBPlat share
This is equivalent to the R180.50 paid to Royal Bafokeng Holdings in November 2021, less dividends subsequently declared by RBPlat
It represents an approximate 15% premium to the Implats offer value on 8 November 2022
The offer consideration will be fully settled in cash, or a combination of cash and Northam holdings shares by way of a cash ratchet mechanism, subject to the level of acceptance of the offer
The minimum cash consideration per RBPlat share amounts to R54.40, assuming full acceptance of the offer, which will ratchet up to R152.42 if Implats does not accept the offer (based on its current shareholding in RBPlat) and a maximum of R172.70, being the full offer consideration, depending on the level of acceptance of the offer
The offer is underpinned by compelling rationale for all stakeholders of both Northam and RBPlat, including shareholders and employees, together with host and affected communities
Should Northam acquire a majority shareholding in RBPlat, RBPlat employees together with host and affected communities will participate in Northam’s approved extended broad-based black economic empowerment transaction

Northam Platinum Holdings Limited has announced its firm intention to make an offer to acquire the remaining shares in RBPlat which it does not already own. Northam currently holds 34.52% in RBPlat, and together with call options and a right of first refusal secured with the Royal Bafokeng Holdings group (RBH), may increase its shareholding in RBPlat to 37.80%.

The offer price amounts to R172.70 and is equivalent to the R180.50 purchase price paid to RBH in November 2021, adjusted for the dividends subsequently declared by RBPlat in March 2022 (R5.35) and August 2022 (R2.45). The offer is priced at an approximate 15% premium to the value of Implats’ offer on 8 November 2022.

The offer consideration will be fully settled in cash, or a combination of cash and Northam Holdings shares depending on the level of acceptance of the offer by way of a cash ratchet mechanism. As at the date of the announcement, Northam has committed R10 billion for the cash consideration and has reserved the right to increase this amount. Based on the R10 billion upfront cash commitment, if RBPlat shareholders collectively holding less than 19.9% of the RBPlat shares in issue accept the offer, the offer consideration will be fully cash settled. If RBPlat shareholders holding more than 19.9% accept the offer, the cash consideration will ratchet down and the balance of the offer consideration will be settled in Northam Holdings shares. If all RBPlat shareholders accept the offer, the minimum cash consideration per RBPlat share will amount to R54.40 and the balance of the offer consideration amounting to R118.30 per RBPlat share will be settled in Northam Holdings shares. If all RBPlat shareholders other than Implats accept the offer, the cash consideration will ratchet up to R152.42 per RBPlat share, based on Implats’ shareholding in RBPlat of 40.71% as per the Implats announcement on 4 November 2022, and the balance of the offer consideration amounting to R20.28 per RBPlat share will be settled in Northam Holdings shares.

For purposes of determining the number of Northam Holdings shares to be issued to settle the share consideration per RBPlat share, Northam Holdings shares will be priced at R187.89 per share, representing Northam’s 3 day volume weighted average price as at close of market on 8 November 2022.

The offer is supported by strong rationale for all stakeholders of both Northam and RBPlat, including shareholders, employees and host and affected communities.

For RBPlat shareholders, the offer presents an opportunity to realise the value of their investment in RBPlat at a significant premium, underpinned by a compelling cash component. In addition, RBPlat shareholders that receive Northam Holdings shares as part of the offer consideration (unless the offer consideration is fully cash settled) will diversify their investment across the Northam Group, whilst retaining indirect investment exposure to RBPlat (through Northam) and will participate in growth initiatives at Northam, as well as at RBPlat should Northam acquire a controlling interest in RBPlat.

For Northam shareholders, the transaction is aligned with the group’s long-term growth strategy and presents a unique opportunity to benefit from the inherent value and growth opportunities embedded within RBPlat’s attractive asset base. RBPlat generates strong cash flows from two established and well capitalised mines that access scarce, shallow, high-quality, platinum group metals (PGM) mineral resources contained within both the Merensky and UG2 orebodies. These orebodies are well understood and have premium loadings of those PGMs, particularly platinum and rhodium, essential to the global clean-air imperative as well as the burgeoning hydrogen economy. Should Northam acquire a controlling interest in RBPlat, the combination of Northam’s experience and technical expertise, together with the inherent qualities and scale of RBPlat’s resource base and infrastructure, will enable the combined group to unlock significant additional value for all stakeholders. In addition, the transaction will further reduce Northam’s overall risk through operational, geographical and metal contribution diversification which is an often under-appreciated consideration in mining and which has been a key element of Northam’s growth strategy since 2015.

Large, shallow, high-quality PGM orebodies, such as those of RBPlat, are scarce. Furthermore, the PGM industry has been under-capitalised for more than a decade, and this is expected to negatively impact primary PGM supply. The rationale for Northam’s investment in RBPlat has been driven by a firm belief in the continued global importance of PGMs which, together with constrained supply, should support metal pricing and resource valuations well into the future. The prevailing commodity cycle favours the acquisition of producing, cash generative and sustainable assets with growth potential, as opposed to the capital-intensive development of long-dated production.

Northam has identified various initiatives for both unlocking value and creating additional value at RBPlat’s existing mines (BRPM and Styldrift), as well as at the currently undeveloped Styldrift II. It intends to pursue these initiatives if it obtains a controlling interest in RBPlat. Northam’s experience and expertise at its Booysendal mining complex, together with the innovative mode of development of the 3 shaft project at its Zondereinde mine, bodes well for modular development and growth initiatives at Styldrift II.

Northam further believes that there is a good cultural fit between its current operations and those of RBPlat. This will harmonise the management, and consequently the performance, of the combined group’s assets, should Northam acquire a controlling interest in RBPlat.

Northam is supportive of an extension to the existing royalty arrangements with Implats in respect of the two Implats shafts (6 and 20) operating on the RBPlat mining area, on commercially reasonable terms, should Implats request an extension. Northam believes that this arrangement will strengthen regional job preservation and stability and will be a beneficial outcome for all affected parties.

In the event that Northam obtains a controlling interest in RBPlat, RBPlat’s employees, together with host and affected communities, will be granted significant participation in Northam’s 15-year extended broad-based black economic empowerment transaction which received overwhelming support from Northam shareholders in 2021.

The offer is conditional upon Northam obtaining a 50% + 1 shareholding in RBPlat, excluding treasury shares, but including Northam’s existing RBPlat shareholding, call option shares and any other RBPlat shares acquired by Northam outside of the offer. Northam has, however, reserved the right to waive this condition. Other conditions to the offer include obtaining the requisite approval from Northam’s shareholders and the necessary authorities.

Paul Dunne, Northam’s chief executive officer, said “the offer is aligned with Northam’s growth strategy and presents a unique opportunity to acquire a controlling interest in a scarce, high-quality ore body with established and well capitalised infrastructure. We are confident in the rationale for all stakeholders in Northam and RBPlat, as well as the value unlock and value creation opportunities underpinned by the inherent value and growth potential embedded within RBPlat’s attractive asset base. Since acquiring our initial shareholding in RBPlat, our balance sheet, liquidity position and credit outlook have strengthened significantly, enabling Northam to present an offer construct to RBPlat shareholders with a compelling cash consideration and an attractive premium, whilst limiting the number of Northam shares to be issued.”