Anglo American Platinum announces it has entered into a conditional Sale and Purchase Agreement on 10 November 2016 with Eastern Platinum Limited, a wholly owned subsidiary of Lonmin plc (“Lonmin”) to sell its 42.5% interest in the Pandora Joint Venture (“Pandora”) for a deferred cash payment of a minimum of R400 million and a maximum of R1.0 billion over six years (nominal terms); and a rental agreement for the use of and full operational control of Lonmin’s Baobab concentrator for a three year period (the “Transaction”).
Rationale for the Transaction
In 2014 Anglo American Platinum announced the repositioning of its portfolio to focus on our most competitive assets, consisting of largely open pit and mechanised operations which will result in higher margin production, a smaller and more highly skilled workforce, safer operations and a less complex organisation. Anglo American Platinum accordingly announced its intent to exit from certain non-core operations including its interest in Pandora.
Deferred payment consideration
Anglo American Platinum will receive a deferred cash consideration calculated as 20% of the distributable free cash flows generated by Pandora on an annual basis for a period of six years subject to a minimum consideration of R400 million and maximum of R1.0 billion (in nominal terms). This deferred consideration is based on the Pandora E3 operations cash flows on a mine-to-ore basis as set out in the ore sales agreement.
Use of Baobab Concentrator
Lonmin will allow Anglo American Platinum continued access to, and full operational control of the Baobab concentrator for a period of three years from the date of completion of the Transaction. The Company will continue to pay Lonmin an annual rental fee, estimated in future at R46 million. Baobab contributed 23,500 ounces of platinum production (metal in concentrate) in 2015
The use of the Baobab concentrator is of strategic importance to Anglo American Platinum, allowing it to process excess ore and unlock value at Mogalakwena mine. Taking over operational control of Baobab concentrator will allow the Company to integrate the operation into its supply chain activities, resulting in cost reduction opportunities for Mogalakwena.
Conditions precedent and effective date
The Transaction remains subject to certain conditions precedent including the approval of the Transaction by the competition authorities of the Republic of South Africa; and all necessary consents being obtained from the Department of Mineral Resources of South Africa, including the section 11 approval for the transfer of the mining right to Lonmin. The Transaction is also subject to approval from the remaining JV partner, Northam Limited. The Transaction is expected to become unconditional during 2017 following the fulfilment of all conditions precedent.
Chris Griffith, CEO of Anglo American Platinum commented on the Transaction:
“Anglo American Platinum is pleased to announce another milestone in the repositioning of our portfolio with the disposal of our 42.5% interest in Pandora to our joint venture partner Lonmin. We believe we have concluded a beneficial transaction for both parties, whilst also securing a sustainable future for the Pandora mine. The benefits of operational control over Baobab will enable us to unlock further value at Mogalakwena mine and achieve cost savings”
Anglo American Platinum’s refers stakeholders to the announcement released by Lonmin on the Stock Exchange News Service of the Johannesburg Stock Exchange and the Regulatory News Service of the London Stock Exchange on 11 November 2016, regarding the Transaction.
Johannesburg, South Africa
11 November 2016