Platinum major Lonmin has entered into binding agreements with the Bapo Ba Mogale traditional community in relation to a series of transactions that will enable Lonmin subsidiaries to meet the required black economic-empowerment (BEE) targets. Under the arrangements, the Bapo would waive their current statutory right to receive royalties from Lonmin's Eastern Platinum (EPL) and Western Platinum (WPL) operating companies – collectively known as Lonplats – in exchange for a lump sum cash royalty payment, payable by Lonplats, that would be used by the community to subscribe for shares in Lonmin.
In addition, a deferred royalty payment of R20-million a year would be payable by Lonplats in each of the five years following completion of the transaction, to be used by the Bapo to pay the administrative costs of running, controlling and directing the affairs of the community. Further, EPL would acquire 100% of the Bapo Ba Mogale Mining Company (BMC) from the community, which held the Bapo's 7.5% participation interest in the joint venture (JV) related to the Rustenburg-based Pandora mine, operated by EPL. This interest in the Pandora JV was BMC's sole asset. EPL already held a 42.5% interest in the Pandora JV, which held mining rights over an area to the east and north of Lonmin's Marikana operations. Part of this area was currently being mined by Lonmin from its existing shaft infrastructure.
The Bapo would use the lump sum cash royalty payment and the consideration payable for 100% of the shares in BMC to subscribe for new ordinary shares in Lonmin to the value of R564-million. Lonmin would allot and issue the shares to a special purpose vehicle, which was a wholly-owned subsidiary of Bapo Ba Mogale Investments NPC (Bapo NPC) – a nonprofit company for the benefit of members of the Bapo community – by way of a nonpreemptive placing. “To preserve the BEE credentials this confers on Lonplats, the shares will be subject to a lock-in period of ten years from the effective date of these transactions, which will occur seven business days after satisfaction of all conditions precedent,” Lonmin said in a statement.
Completion was expected to occur in the fourth quarter of the year. The R564-million included a premium of R149-million in recognition of the benefit to Lonmin of the ten-year lock-in period, during which time the shares may not be sold or encumbered by the Bapo. The deferred royalty payment of R20-million a year payable by Lonplats in each of the five years following completion of the transaction was intended to be funded from the existing cash resources or debt facilities available to the group. Based on the 30-day volume-weighted average price of R42.97 on July 29, the issue of shares would necessitate the issue of 13.13-million shares, equating to 2.25% of the post-issue equity share capital of Lonmin. The parties had further agreed that Lonmin would provide an opportunity for the Bapo community to participate in the procurement and business value chain activities of Lonplats to a minimum revenue value of R200-million within 18 months from completion of the agreement. This would be achieved by granting the Bapo NPC preferential status when tendering for the supply of goods and services to Lonplats.
Further, Lonmin and the Bapo would jointly create a developmental trust for members of the Bapo community, to be known as the Bapo Community Local Economic Development Trust. “It is intended that 0.9% of the issued share capital of EPL and 0.9% of the issued share capital of WPL will be transferred from Lonmin subsidiary LSA into the legal and beneficial ownership of the Bapo Trust on a vendor funding basis. “The aims of the trust will be to promote educational initiatives and healthcare improvement, as well as address the developmental needs of the Bapo,” the group outlined. Lonmin said it believed from discussions with the Department of Mineral Resources that the Bapo transaction would increase the BEE equity status of Lonplats by 3.3%. The miner, meanwhile, indicated that it also intended to implement an employee share ownership plan and a community share ownership trust for the benefit of local communities on the western portion of its Marikana operations. The trusts would collectively hold the 4.7% balance of the additional 8% equity empowerment, which EPL and WPL required to achieve the 26% effective BEE equity ownership target by December 31. “The Bapo is a stakeholder of great importance to Lonmin and [we] believe that the transaction will help build a new and stronger relationship with the community,” Lonmin stated. The Bapo chief Kgosi Bob Mogale added that the agreement represented the most sustainable and fair way forward. “I hope this will also bring financial benefits to our people as it helps to build stronger bonds between the Bapo and Lonmin,” he noted. Mineral Resources Minister Ngoako Ramatlhodi welcomed the agreements, saying they further advanced government’s programme of sustainable transformation by ensuring that communities shared in the wealth of the country.
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