The board of Royal Bafokeng Platinum (RBPlat) certainly took its time to form an opinion about an offer from bigger rival Impala Platinum (Implats) to buy at least a controlling stake in the midtier precious metals miner.
It could have well been waiting to see if Northam Platinum, led by contrarian CEO Paul Dunne, still had the stomach to take on Implats in the tussle for RBPlat, which sits atop a shallow high-grade resource that could be dug out for about six decades.
But in the absence of another suitor and with Dunne silent since his company became the biggest shareholder in RBPlat after striking a R180 per share deal with Royal Bafokeng Holdings, the board had little choice but to advise shareholders to accept Implats’ R150 per share offer.
We do not know if Implats’ offer, which values the company at R43bn, is the same one pitched to shareholders before Northam dangled its commercially superior offer to Royal Bafokeng Holdings. The latter’s acceptance of the offer, which values RBPlat at R52bn, knocked Implats’ original intention to buy out the company off course.
But it is safe to surmise that the Implats offer, for all its compelling industrial merits and value-creation opportunities, was nowhere near what Northam offered Royal Bafokeng. One cannot fault Leruo Molotlegi, the traditional king of the Bafokeng community in the North West who leads Royal Bafokeng, for rejecting the Implats bid in favour of a bilateral deal with Northam.
At the time, it had looked as if Nico Muller, the boss of Implats, would miss out again, until a large chunk of shareholders felt aggrieved at being sidelined in the Northam-Royal Bafokeng Holdings deal. That anger was enough for Muller to renew his approach to RBPlat, offering a combination of cash and shares to minorities and securing more than a third of the company from some.
So far, so good for Muller, who is determined to add RBPlat’s low-cost, mechanised assets, which are vital to extending the life of the Implats deep-level operations in the adjacent Rustenburg mining complex.
But Dunne, who went against the trend in the middle of the last decade by investing heavily in production when others in the sector were cutting capital expenditure after the collapse of metal prices, may still pull a rabbit out of the hat.
Yes, he seems to be backed into a corner with limited options. It is unlikely that the Takeover Regulation Panel, a merger & acquisitions watchdog in the department of trade & industry, will allow his team to formulate a new, lower offer to minorities when only a few months ago it coughed up R180 per share. Minorities will rightly cry foul.
Even so, Dunne may still extend the generous offer to Implats if he thinks shareholders, who stood by his side in the mid-2010s when he pumped money into Northam’s mines in pursuit of a 1-million ounces target, will back him one more time.
Dunne can probably pitch potential equity capital raising to fund the deal that rests on the idea that platinum group metals will have a place in a cleaner, environmentally friendly world. Last week President Cyril Ramaphosa detailed government plans to position SA as global leader in the hydrogen economy with a development pile worth R270bn. Platinum is used in electrolysers to make hydrogen and fuel cells powering cars, trains and ships.
Other countries have come up with policies aimed at developing a hydrogen economy, the standout of which is Germany. Europe’s largest economy launched a $10bn plan to develop large-scale green hydrogen by using wind and solar power to make synthetic fuels for industry, energy and transport sectors.
With more and more countries committing to net-zero emission targets, Dunne has enough reasons to tap shareholders for cash to fund the acquisition that will give his company a bigger slice of a market increasingly looking to hydrogen as an alternative to fossil fuels.
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