Northam builds funding capacity with potential pref share repayment in sight
MINING MX / 31 MAY 2019 -14.11 / DAVID MCKAY
NORTHAM Platinum provided further evidence it may be preparing to buy-back preference shares it issued to its black economic empowerment partner, Zambezi Platinum in 2016.
Commenting in an announcement that the firm had increased its existing revolving credit facilities R500m to R3.5bn, and arranged a new R500m general banking facility, Paul Dunne, CEO of Northam Platinum, said the funding flexibility could allow for the repurchase of ordinary shares or the Zambezi preference shares.
“The R1bn increase in available facilities is in addition to the placement of R1.65bn of domestic medium term notes announced on April 16, and further strengthens Northam’s balance sheet,” he said.
Northam Platinum raised R4.2bn in 2016 when it sold a 31.4% stake in the business to Zambezi Platinum which subscribed for preference shares. The preference shares, which are listed on the Johannesburg Stock Exchange, were secured with ordinary shares in Northam Platinum.
Northam Platinum paid Zambezi Platinum R400m upfront in compensation for a lock-in on the stake in the company for 10 years (to 2026), but it does have the option of buying back for shares or cash the preference shares.
Dunne said at the firm’s full-year results presentation in September last year that buying back the preference shares represented the best form of value return to shareholders, but it could only be contemplated once an aggressive expansion strategy had been financed.
Having taken productive potential to one million ounces of platinum group metal (PGM) annually, largely through resource replacement and expansion at its existing Zondereinde mine and Booysendal project, and with decent PGM pricing at its back, Northam is better placed to consider shareholder returns than in recent history.
It forecast in February at its half-year results presentation that net debt would fall to about R2.2bn from R2.9bn by the year-end, period-on-period. It also estimated that total funding would be about R3.2bn compared to the current R3.5bn.
In terms of today’s announcement, the maturity date of Northam’s existing R1bn revolving credit facility (RCF) has been extended to match that of its existing R2bn RCF.
Both of these facilities, as well as the R500m increase, have been combined into a single R3.5bn RCF maturing on 29 November 2021, the company said.
The interest rate on the total RCF remains unchanged and the general banking facility will accrue interest at a variable rate of prime less 1.5%.
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