Lonmin PLC Lonmin acquires remaining 7.5% stake in Pandora (0672F)
May 15 2017 - 1:01AM
UK Regulatory
TIDMLMI
RNS Number : 0672F
Lonmin PLC
15 May 2017
LEI: 213800FGJZ2WAC6Y2L94
REGULATORY RELEASE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
15 May 2017
Lonmin acquires the remaining 7.5% stake in Pandora
Lonmin Plc ("Lonmin" or "the Company") is pleased to announce
that, on 13 May 2017, it entered into a conditional Sale and
Purchase Agreement to acquire Mvelaphanda Resources Proprietary
Limited's ("Mvelaphanda") 7.5% equity interest in the Pandora Joint
Venture ("Pandora JV") for a cash payment of R45.565 million (the
"Transaction"). Mvelaphanda is a wholly owned subsidiary of Northam
Platinum Limited ("Northam"). In addition to the cash payment,
Lonmin will refund the value of any cash calls paid by Mvelaphanda
to the Pandora JV during the period from 1 January 2017 and
completion of the Transaction (the "Cash Calls"). The Company's
current expectation is that the aggregate Cash Calls payable to
Mvelaphanda will be between approximately R6 million and R8 million
depending on the timing for completion of the Transaction, subject
to a maximum cap. As announced on 11 November 2016, Lonmin has also
agreed to acquire Anglo American Platinum's ("AAP") 42.5% equity
interest in the Pandora JV and is currently in the process of
obtaining regulatory approvals for this acquisition which we
anticipate to complete during 2017. Completion of the two
transactions will result in Lonmin increasing its ownership in the
Pandora JV to 100%.
As at the date of this announcement, the Pandora JV is currently
held 50% by Lonmin's subsidiary, Eastern Platinum Limited ("EPL"),
42.5% by AAP through Rustenburg Platinum Limited and 7.5% by
Northam through Mvelaphanda.
Rationale for the Transaction
The acquisition of Mvelaphanda's 7.5% stake in the Pandora JV
allows Lonmin to consolidate its position in this relatively
shallow and high-grade mineral resource, providing an attractive
option for development by EPL in both the short- and longer term.
The Pandora JV area, which is contiguous with our existing EPL
operations, relies on Lonmin's mining and processing infrastructure
and is already operated by EPL. The Pandora JV contributed 32,509
Platinum ounces (63,857 Platinum Group Metal ("PGM") ounces) to
Lonmin in the 2016 financial year.
Lonmin will be able to access a portion of the Pandora mining
right from our adjacent Saffy shaft. This access will allow us to
defer R1.6 billion of capital expenditure at the Saffy shaft over
the period from 2018 - 2020 while maintaining full production at
that shaft, as well as a further R1 billion of capital expenditure
deferral thereafter. In the longer term, Lonmin will also have the
option to optimally develop this shallow, high-grade resource as
and when supported by market conditions.
Consideration payable to Mvelaphanda
In consideration for the sale of its 7.5% equity interest in the
Pandora JV to Lonmin, Mvelaphanda will receive a cash payment of
R45.565 million on completion of the Transaction. In addition, the
value of any Cash Calls Mvelaphanda has had to contribute to the
Pandora JV in the period between 1 January 2017 and completion of
the Transaction will be reimbursed to Mvelaphanda. The Company's
current expectation is that the aggregate Cash Calls payable to
Mvelaphanda will be between approximately R6 million and R8 million
depending on the timing for completion of the Transaction, subject
to a maximum cap(1) .
In the event that the Transaction takes more than 12 months to
complete, the purchase consideration (including any Cash Calls to
be reimbursed) will escalate by the prevailing prime overdraft
interest rate thereafter (together, such amounts being the
"Interest Payments"), subject to a maximum cap(1) .
Description of the business of the Pandora JV
The Pandora JV mines PGMs from the UG2 and Merensky reefs
underlying the Pandora JV mining area. 100% of the ore produced by
the Pandora JV is sold to Lonmin for processing and refining. The
gross assets of the Pandora JV were R1.1 billion as at 30 September
2016. Pandora JV made an operating loss of R109 million in
financial year 2016, of which 50% was reflected in Lonmin's 2016
accounts. Lonmin received a contribution of R117 million in FY2016
from the ore purchase agreement, which offset the JV loss.
Conditions precedent and effective date
The Transaction remains subject to certain conditions precedent
including all necessary consents being obtained from the Department
of Mineral Resources of South Africa, including Section 11 approval
for the transfer of the mining rights. The Transaction is also
subject to approval by Lonmin's lending banks. Completion of the
Transaction is expected to occur during 2017 following the
fulfilment of all conditions precedent.
Commenting on the Transaction, Ben Magara, Lonmin's Chief
Executive Officer said: "We are pleased to announce the acquisition
of Mvelaphanda's stake in the Pandora JV. Together with the
acquisition of AAP's 42.5%, this will result in Lonmin ultimately
owning 100% of the Pandora JV. This is an excellent strategic fit
for Lonmin, which increases our exposure to a valuable asset with
long-term development potential and allows us to maintain
production levels at Saffy while significantly reducing our capital
expenditure requirements at this operation over the short- and
medium-term."
Footnotes:
[1] The maximum amount of Cash Calls and any Interest Payments,
in the event that the Transaction takes more than 12 months to
complete, payable to Mvelaphanda is capped at R50 million in order
to ensure that the transaction would not be treated as a class 1
transaction under LR10 Annex 1 5(R)(3).
[2] In 2017 real terms.
ENQUIRIES
Investors / Analysts:
Tanya Chikanza (Head of Investor Relations) +27 11 218 8358 / +44 203 908 1073
Andrew Mari (Investor Relations Manager) +27 11 218 8420
Media:
Wendy Tlou +27 11 218 8300 / +27 83 358 0049
Cardew Group
Anthony Cardew / Emma Crawshaw +44 207 930 0777
Notes to editors
Lonmin, which is listed on both the London Stock Exchange and
the Johannesburg Stock Exchange, is one of the world's largest
primary producers of PGMs. These metals are essential for many
industrial applications, especially catalytic converters for
internal combustion engine emissions, as well as their widespread
use in jewellery.
Lonmin's operations are situated in the Bushveld Igneous Complex
in South Africa, where more than 70% of known global PGM resources
are located.
The Company creates value through mining, refining and marketing
PGMs and has a vertically integrated operational structure - from
mine to market. Underpinning the operations is the Shared Services
function which provides high quality levels of support and
infrastructure across the operations.
For further information please visit our website:
http://www.lonmin.com
- ENDS -
This information is provided by RNS
The company news service from the London Stock Exchange
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