Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
South Africa’s Northam Platinum said on Tuesday that it would buy back all preference shares from its Black economic empowerment vehicle, Zambezi Platinum, four years ahead of its 10-year maturation date.
The nearly 2 billion rand ($135.58 million) transaction will offer a 16% premium for the Zambezi preference share and will also include an overall 25% share buyback by Northam, the company said.
Northam had been buying back Zambezi’s preference shares from institutional shareholders to reduce its own preference share dividend expense and liability and potential financial exposure under the guarantee it gave to shareholders.
The platinum miner, which opted to buy back the preference shares instead of declaring dividends to return value to shareholders, owns 87.5% of Zambezi with the maturity of the preference shares issued by Zambezi originally due in 2025.
The South African government mandates companies to allow Black employees and investors to hold equity in the company to help to reverse decades of Black people’s exclusion under apartheid.
Zambezi Platinum was set up in 2015. It issued new preference shares that Northam bought and then, with the proceeds it bought ordinary shares in Northam.
Preference shares create a financial responsibility for a company to regularly pay dividends at a fixed rate over common shareholders and buy back all the shares on maturity at the then existing price. Preference shareholders do not have voting rights.
Through the transaction, which includes the issue of ordinary shares in the company to Zambezi’s shareholders, Northam has to implement an extended empowerment transaction for a period of 15 years, the company said.
($1 = 14.7511 rand)
(By Promit Mukherjee; Editing by Tanisha Heiberg and Barbara Lewis)
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