JOHANNESBURG (miningweekly.com) – The world and South Africa’s third-largest platinum miner Lonmin is giving Cyril Ramaphosa’s Shanduka a fair crack at the platinum mining whip.

Up to now, Lonmin’s dormant Limpopo assets have been something of a letdown.

If Shanduka can succeed in turning them to positive account, the black economically empowered (BEE) company will be given control of the Limpopo mines for R1.1-billion ($137-million).

However, if Shanduka decides at some stage to sell the proposed operations, it will have to give Lonmin first dibs.

The reward for the London- and JSE-listed Lonmin, whose chairperson Roger Phillimore told Mining Weekly Online in Toronto in June that there was a “growing sense of concern” among London’s investment community over the operating risks of doing business in South Africa, is that it will make South Africa’s 26% BEE cut well ahead of the 2014 deadline.

Shanduka’s BEE predecessor, Incwala Resources, also had a dream of becoming an operator in the days when former Lonmin CEO Brad Mills ruled the roost, but that dream turned into a nightmare when the global financial meltdown struck in late 2008 and the Incwala shareholders found themselves in deep financial distress.

New Lonmin CEO Ian Farmer set out quickly to end the BEE misery by handpicking the blue-chip Shanduka.

By that stage, Incwala, which Shanduka swallowed up, had already been an owner of 18% of Lonmin’s Limpopo assets for two years and it was at that stage that Lonmin transferred the Limpopo assets into Western Platinum Limited (WPL).

Incwala also had 26% of Akanani Mining under its belt after paying the previous BEE partner R800-million for it, again with the intention of becoming an operational miner and not a passive portfolio investor.

With the Shanduka buy-in, Ramaphosa was snapped up as a Lonmin nonexecutive director.

This was useful as Lonmin had got on the wrong side of South Africa’s Department of Mineral Resources as a result of the Keysha tick-tack over Lonmin's failure to apply for mining rights not involving platinum, including chrome rights, which Keysha's Sivi Gounden - a former Lonmin director - snapped up.

Shanduka’s entry has since set Lonmin on a course of wanting to transform itself “into a model for fairness and equality in the new South Africa”.

Lonmin plc has roped WPL and Messina Platinum Mines Limited (MPML) in particular into the latest share subscription agreement that gives Shanduka to right to carry out a feasibility review of getting the Limpopo division up and running. The assets, situated near Polokwane on the Bushveld’s eastern limb, are still on care and maintenance.

Assuming a successful outcome of the feasibility review, Shanduka will raise the money needed to buy 50% plus one share of MPML, which WPL indirectly wholly owns, and thereby acquiring control and operational management of Limpopo.

Although Lonmin’s shares fell in both London and Johannesburg, analysts put the fall down to general market volatility rather than the announcement and by late afternoon, Lonmin’s shares had bounced back to R130 a share in Johannesburg.

The company says that the deal’s purpose is to enable it to work with Shanduka to develop Limpopo on a manageable scale.

It adds that the deal gives it a chance to meet the revised Mining Charter’s 26% equity target, and furthers Shanduka’s strategy of operating platinum assets.

Capital from Shanduka will also let it retain its balance sheet capacity and focus on growth from its flagship Marikana operations.

It will also transform MPML into a BEE-controlled and operated platinum-group metals (PGMs) mining company.

WPL has undertaken that it will hold 100% of MPML ahead of the deal, when its 50% share in the Dwaalkop joint venture (JV) will have been sold to MPML.

Because of the incestuous Shanduka-Ramaphosa-Incwala interlink in Lonmin, Shanduka runs the risk of being branded a related party.

If that happens, the deal will require an official nod of approval from Lonmin’s full body of shareholders.

WPL, in which Lonmin and its subsidiaries will continue to hold an 82% interest, will hold on to the shares beyond Shanduka 50% plus one share, opening the way for Shanduka to develop, operate and manage a platinum mine.

In addition, WPL will be given a R400-million preference-shares boost from MPML.

If in the future the Limpopo division operations are expanded beyond a production level of 250 000 oz of PGMs a year, WPL will have the option to  fund the expansion on its own, with a commensurate increase in shareholding.

Lonmin’s Limpopo division currently comprises the Baobab mine, including the Baobab shaft and infrastructure, and MPML’s 90 000 t/m concentrator, as well as half of the Dwaalkop JV, the other 50% being the property of Tokyo Sexwale’s Mvelaphanda Resources. Also in the mix is MPML’s Doornvlei project and the Zebediela’s Location prospecting area, down dip and along strike of the Baobab Shaft.

The Limpopo division has reserves and resources of 25.5-million ounces of PGMs and gold.
 

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