Shares of Royal Bafokeng Platinum (RBPlats) surged almost a quarter on Wednesday after bigger rival Impala Platinum (Implats) said it planned to buy it in a deal that could create the world’s biggest platinum group metals (PGMs) producer.
Flush with a R23.5bn net cash pile, Implats’s move offered prospects of further consolidation in an industry that has got a boost from higher rhodium and palladium prices.
Prices have jumped for some PGMs, which are used in anti-pollution devices in car engines.
They have also been boosted by temporary mine closures in Russia due to flooding, and unreliable energy in SA, which has constrained supply.
Implats said it is in talks to acquire RBPlats, propelling the latter’s shares as much as 23.6% higher. They later pared gains to close 20.57% ahead at R114.30, adding just under R6bn to its valuation, which stood at R30bn. Implats declined 1.4%, giving it a market value of R170bn. Its shares have advanced 3.1% so far in 2021.
The miners said in a joint statement on Wednesday that discussions are ongoing that could see Implats acquire all of RBPlats’s ordinary shares, leading to the delisting of the mid-tier miner. Implats did not mention a price in its cautionary announcement.
A combination between Implats, which posted record profit in September, and RBPlats has been mooted before and would help the former exploit synergies from deposits adjacent to its Rustenburg mining complex, Bloomberg reported.
With miners using cash resources to expand, the proposed deal is the latest in a consolidation phase that has been led by Sibanye-Stillwater, which took over Lonmin in a R4.3bn deal in 2019.
On Wednesday, Sibanye, which may be overtaken by a combined Implats-RBPlats in terms of output, said it has agreed to pay $46m (R690m) for a stake of almost 20% in tailings retreatment group New Century, extending its footprint into Australia and adding zinc to its portfolio. It also agreed a $1bn deal this week to buy nickel and copper mines in Brazil.
Chantal Marx, head of investment research at FNB Wealth and Investments, said a deal could be mostly cash-funded. “We have already seen major consolidation in the PGM space over the last few years — mainly led by Sibanye-Stillwater,” said Marx. “The remaining listed operators are quite large, with the exception of a few smaller mining companies along the value chain, which could still be acquisition targets.”
But these may not be large enough to move the needle for the big players, she added.
Should Implats’s proposed buyout of RBPlats succeed, it would vie with Russian group Norilsk Nickel as the world’s biggest PGM group in terms of own-mine production.
However, Anglo American Platinum (Amplats) would retain its status as the world’s biggest producer of refined PGMs.
RBPlats was born out of a joint venture between Amplats and Royal Bafokeng Holdings, the investment vehicle for the Royal Bafokeng nation, which held 35.8% of RBPlats at end-June.
RBPlats owns the Bafokeng Rasimone Platinum Mine and is ramping up its new Styldrift mine to steady-state production.
Implats has mines next to Rasimone, and the two have agreements dating back to 2010 that allow Implats to access parts of RBPlats’s ore body in return for royalty payments.
Income from the Implats royalty agreement totalled R382.2m in RBPlats’s 2020 year, when it generated a record R13.38bn in revenue.
Update: October 27 2021
This story has been updated with new information throughout.
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