JOHANNESBURG (miningweekly.com) - JSE-listed Mvelaphanda Resources (Mvela) announced on Monday that it would sell 12,2% of its holding in platinum-miner Northam Platinum to the global diversified mining group Eurasian Natural Resources Corporation (ENRC).

The South African black economic-empowerment company would sell 44-million of its shares at R50 a share to the value of R2,2-billion to ENRC, but would continue to hold a 50,5% interest in Northam.

The proceeds would be used to pay down debt, with the company having reported in its interim results, ended December 2009, that it had reduced its debt year-on-year by 48% to R2,3- billion.

The transaction would be wholly funded from ENRC's existing resources, with the completion of the transaction expected in May.

ENRC CEO Felix Vulis said that the purchase of the interest in Northam was in line with the company's strategy of diversifying its commodity and its geographical exposure.

The company's stock rose by more than 3% on the news.

ENRC mines and processes chrome, manganese and iron-ore and has ferroalloy smelting capacity, as well as a number of other mineral and mineral beneficiation interests, with most of its facilities located in the Republic of Kazakhstan.

Mvela executive deputy chairperson Bernard van Rooyen said that the proceeds received from ENRC would substantially reduce Mvela's debt and enable it to proceed with the simplification of its corporate structure under the company's unbundling strategy.

Meanwhile, Northam CEO Glyn Lewis commented that the interest that ENRC had demonstrated in Northam signalled the potential that global mining groups saw in the South African mining space and their confidence in the fundamentals of the platinum-group metals (PGMs) sector.

Northam's current assets comprise the long-life Zondereinde platinum mine near Thabazimbi, which produces some 300 000 oz/y of PGMs and the 103-million ounce Booysendal PGM project on the eastern limb of the Bushveld Complex.

Further, Northam reported recently that work had started at its Booysendal project. It is expected that the first module of this project is likely to be in full production by August 2014, with output of 130 000 oz/y, thereby lifting the company's total PGMs production by almost 40% to 430 000 oz/y.

"PGMs are once again demonstrating their strong fundamentals; less than two years after the massive price slump in mid-2008, platinum is trading at extremely healthy levels well above $1 600/oz, and palladium at over $500, further bolstering the Zondereinde mine's ability to continue to generate cash as it has done over the years in market conditions considerably less robust than we are seeing now," said Lewis.

Vulis said that the company's new interest in Northam was a strategic opportunity to invest in one of the largest PGMs miners in the world at a time when platinum is expected to benefit from increased demand and to face supply constraints.

"Northam will continue to evaluate various project funding mechanisms, which includes a number of debt funding options," concluded Lewis.

Northam's stock rose nearly 2% on the news and was trading at R53 a share by 15:00 in Johannesburg. Its share price closed at R52,10 a share on Monday afternoon.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.