Northam’s decision to sell its 34.5% stake in Royal Bafokeng Platinum (RBPlat) to Impala Platinum (Implats) has piqued the market’s interest. Northam’s value dropped by R4 billion as it sold its stake for around R13 billion, down from the R17.8 billion it initially paid during a bidding war with rival Implats in 2021. Despite the cut, Northam will receive R9 billion in cash and a 3% stake in Impala, which is currently worth around R4 billion.
Implats now owns approximately 91% of RBPlat, and the remaining shareholders have a limited time to accept or reject the same deal offered to Northam. According to Implats spokesperson Johan Theron, the acquisition of Northam’s stake clears the way for Implats to achieve 100% ownership of RBPlat. He did, however, emphasise that Implats and RBPlat will remain operationally independent for the time being.
Financial analysts have largely praised the transaction, citing its benefits for both Implats and Northam. The transaction removes the uncertainty surrounding RBPlat’s ownership and allows for the two assets to be integrated seamlessly. Given the previous contentious battle for control of RBPlat, a joint venture or other collaborative arrangement between the companies may have proven difficult. Given these considerations, the market is expected to overlook Northam’s R4 billion loss and instead focus on the potential benefits of a R9 billion cash boost to their balance sheet, which could result in dividends for shareholders.
The decision to sell the RBPlat stake was influenced by current market conditions and the recent drop in platinum group metal (PGM) prices, which signalled the possibility of a prolonged market downturn. Northam CEO Paul Dunne sees the transaction as a timely opportunity to secure a substantial cash injection that will strengthen the company’s financial position and liquidity. It also strengthens Northam’s ability to provide value to its shareholders through dividends and share buybacks.
The decline in PGM prices justifies Northam’s interest in the deal even more. Furthermore, the companies stand to benefit from several synergies created by the transaction. Implats and RBPlat share a common boundary in the Rustenburg area and have a long history of cooperation, dating back to royalty agreements signed in 2010. RBPlat receives 17.5% of the gross PGMs from certain properties mined by Implats at specific shafts. Implats will gain more flexibility in mining operations as a result of the acquisition, and the company will effectively pay the royalty to itself as the owner of RBPlat.
Furthermore, Implats’ excess smelting capacity can accommodate some of RBPlat’s output, which is currently processed by Anglo Platinum. Changing the current processing arrangement is a necessary step, but it is expected to benefit all parties involved.
Another significant synergy is improved power supply management to the combined Implats and RBPlat operations. The presentation of a unified voice to electricity supplier Eskom is expected to result in more efficient operations.
The most compelling synergies, according to Johan Theron, are expected in the long term, as the acquisition extends the combined assets’ life by decades. Overall, the transaction bodes well for Implats and Northam, providing them with strategic advantages and strengthening their market positions.
