Investor relations executive James Wellsted says that the company, 22,9%-owned by Tokyo Sexwale's Mvelaphanda Holdings, sees consolidation as opening up growth potential as the Charter 2009 deadline looms closer.
In a recent presentation to investors, the company said: “(There is) additional growth potential through proactive participation in (the) anticipated consolidation of (the) current BEE mining sector at asset level.”
Wellsted added that black economic-empowerment holdings in the industry are currently too fragmented.
Consolidation in the industry is part of Mvelaphanda Resources' growth strategy, which is underpinned by a strong balance sheet, providing it with the room to grow organically and through acquisitions.
Mvelaphanda Resources, headed by Pine Pienaar, also intends making use of the Mining Charter window period to add new assets to its current portfolio.
In the initial first יִve-year period of the Charter, which ends in May 2009, existing mining companies are required to transfer at least 15% of their South African assets and exploration companies up to 51% (on State-owned land) into historically-disadvantaged South African's hands.
This is the minimum requirement for companies to receive new-order mining and prospecting permits under the new dispensation.
The Mining Charter spans a ten-year period starting in 2004 in which assets will be transferred from previously white-controlled companies to black economic-empowerment or black-controlled companies.
Mvelaphanda's take on the process is that the bulk of asset transfer will take place early in the process, or that many companies will have aligned themselves with empowerment groups for the second phase of transfer to take empowerment ownership up to 26%.
On its website, the company argues that “empowerment companies emerging from the יִrst phase of the Mining Charter period will most likely appear to be large, unfocused investment holding companies with little or no control over their underlying assets and cash ﬂows”.
It argues “if empowerment groups are to have any chance of long-term survival in the mining industry, they are going to have to become more focused and gain control of at least some of their underlying investments”.
To avoid this, Mvelaphanda argues, “empowerment groups are going to have to cooperate to an extent not seen before in the notoriously insular South African mining industry”.
In addition, while it seeks to add value to the investments in its portfolio, Mvela still seeks to have operational control over its assets.
It has investments in South African precious metal and mineral assets in the gold, platinum and diamond sectors as well as exploration and development joint ventures in sub-Saharan Africa, with a focus on South Africa.
Despite being invested in the precious metals and diamonds sectors, the company is not limited to investing in these resources and has already stated that it will pursue opportunities throughout the mining and minerals sectors.
Listed investments include a 22,3% stake in Northam and a fully diluted 20,7% stake in Trans Hex, with an unlisted deferred 15% position in the South African assets of Gold Fields through GFI-SA.
Exploration and development joint ventures have been established with quality global mining groups such as De Beers, Anglo Platinum, Gold Fields, Trans Hex, Etruscan Diamonds and Lonmin.
The company's long-term strategy is to ultimately gain operating control over most key investments.
However, given financial constraints, the legislative environment, which currently only prescribes the sale of 15% to 26% of assets to empowerment companies, and shareholding constraints, Mvela Resources is likely to remain primarily an investment holding company or diversified mining house during the initial phase of Mining Charter period.