Platinum group metals (PGMs) producer Northam Platinum has acquired 4.03-million preference shares of Zambezi Platinum, valued at R200-million, from Coronation Asset Management.
Effected on October 31, the preference shares were bought at R49.47 apiece, constituting about 2.5% of the total preference shares in issue.
The preference shares were issued by Zambezi in 2015 in terms of Northam’s black economic empowerment (BEE) transaction, which raised Northam’s empowerment equity to 31.4%.
Northam CEO Paul Dunne last week said the preference shares offered an attractive yield, while acting as a partial hedge against any potential financial liability which could arise in respect of the guarantee that Northam provided the holders of preference shares in terms of the Northam BEE transaction.
Northam considers the preference shares to be a high-yield instrument with a credit risk profile that matches its own.
The preference shares generate a high return without the introduction of significant additional third-party risk for Northam. The PGMs producer may access future liquidity through the disposal of the preference shares and should Zambezi elect to redeem the preference shares using Northam ordinary shares, Northam will benefit from the discount that will apply to Northam ordinary shares.
Further, the acquisition partially hedges Northam against potential future liability, which could become payable pursuant to the guarantee provided by Northam to preference shareholders.