Thursday, 10 March 2011

China blazes SA platinum trail with R6bn deal

Photo: Sunday Times
Consortium will acquire 45% stake in Wesizwe, build mine
Published: 2011/03/10 06:32:24 AM

WESIZWE Platinum shareholders yesterday voted in favour of an $877m (R6bn) venture with a Chinese consortium to build a new platinum mine in SA, underlining China’s growing interest in the country’s resources sector and giving the Asian powerhouse its first direct exposure to a major platinum play in SA.

The vote clears the way for the building of a concentrator and a 350000oz-a-year platinum group metals mine in North West.

The biggest casualty of the decision was the company’s founder and longest-serving director, Julian Williams, who was removed from the board.

Of the shareholders represented at Wesizwe’s annual general meeting in Johannesburg yesterday — which was postponed in August last year — 71% voted against Mr Williams returning to the board.

It is understood that Mr Williams’s removal was, ironically, related to his determined support of the Chinese deal, in which Jinchuan Group and China-Africa Development Fund will acquire 45% of Wesizwe.

The meeting was marked by the presence of police, private security officers toting shotguns and medical personnel. There were fears of a community protest spiralling out of control at the venue, which did not occur.

A court order postponed the annual general meeting in August. An urgent application had been brought to decide who had the right to vote with shares held by the Bakubung Community Development Corporation and Newshelf 925. This application was withdrawn in January, clearing the way for yesterday’s shareholder meeting.

Wesizwe has been plagued over the past few years by community in-fighting over the ownership of 117-million shares.

Community and business leadership struggles nearly resulted in a takeover of the board by a group backed by a faction of the community in 2009.

The Chinese deal promises to calm one of the most brutal battles for control of a mining company , but it comes at the short-term cost of diluting the Bakubung baRatheo community’s stake in the company.

It also causes an additional problem for the directors of meeting the government’s 26% black ownership target by 2014.

The Bakubung Community Development Corporation’s exposure to Wesizwe, which had grown to 143-million shares, was reduced by half at the end of last year.

This came after an investment vehicle — Newshelf 925 — ceded about 70-million Wesizwe shares owned by the community to Deutsche Bank, after Newshelf was unable to repay a loan extended by the bank.

This trimmed Wesizwe’s empowerment levels to about 22% and the Chinese deal will halve that again.

Wesizwe has now set up a special purpose vehicle called Micawber, which will buy more than 97-million shares for $26,6m and give it 6% of Wesizwe. The Chinese consortium is providing a commercial loan for this transaction. Micawber is owned by the Wesizwe Empowerment Trust, whose beneficiaries are the empowerment companies that own Wesizwe shares.

This deal marks the first real entrance of the Chinese into South African platinum mining.

The China Development Bank is the sole shareholder in the China-Africa Development Fund, which was launched in June 2007 with an initial tranche of $1bn. Its total capital investment will ultimately reach $5bn.

The fund has made investments of nearly $400m in projects in Africa, which were facilitating more than $2bn of further Chinese investments on the continent.

Arthur Mashiatshidi, CEO of Wesizwe, said yesterday that an audit that had been commissioned would establish Wesizwe’s empowerment credentials .

The Bakubung’s remaining 73- million Wesizwe shares were now housed in Africa Continental Resource Ventures, which was half-owned by the Bakubung community, said William Jimmerson, a director at Musa Capital, which set up the company.

Musa Capital is being investigated by the Financial Services Board for not applying for permission to operate as advisers to the Bakubung.

"The community no longer directly holds shares in Wesizwe," Mr Mashiatshidi said. Anglo Platinum, whose 26% stake in Wesizwe would be reduced to about 13%, had no desire to retain those shares.

The company said yesterday that it could possibly sell them to an empowerment entity to ensure Wesizwe met its black ownership target .

"We don’t believe in holding minority stakes, so at some stage we will dispose of it.

"It’s not a strategic asset for us," said Kenny Mokoka, Anglo Platinum ’s head of business development.

Anglo Platinum has given Wesizwe a commitment to help it achieve its 26% empowerment target. "We said we would do everything reasonable to assist them. If they need our shares to be sold to HDSAs (historically disadvantaged South Africans) to maintain their status we will assist them," Mr Mokoka said.

At a special meeting immediately after the annual general meeting yesterday, more than 88% of shareholders approved the Chinese transaction.

The consortium would buy 45% of Wesizwe, injecting much-needed capital into the business. The board would be restructured in coming months to give the Chinese representation on it.

Included in the deal was a requirement for Jinchuan and the China-Africa Development Fund to secure 650m in project financing for the new R6,6bn twin-shaft mine and concentrator.

The Jinchuan Group is China’s largest producer of nickel and platinum group metals.

A faction of the board was opposed to the deal and instead proposed a merger with another junior platinum group, thought to be Canada’s Platinum Group Metals, which has a contiguous project.

The faction turned shareholders against Mr Williams, who was Wesizwe’s first CEO and had served on its board since 2003.

One large shareholder, who asked not to be identified, said of Mr Williams’s departure: "I’m not surprised. He doesn’t fit any more."

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