Cape Town - Platinum group Lonmin has entered into binding agreements with the Bapo ba Mogale community to meet black economic empowerment (BEE) targets, it said on Wednesday.
The company said the Bapo would waive their current statutory right to receive royalties from Lonmin's operating company Lonplats, made up of Eastern Platinum Limited (EPL) and Western Platinum Limited (WPL).
In exchange they would receive a lump sum cash royalty payment from Lonplats that would be used to subscribe for shares in Lonmin.
These placing shares would be to the value of R564 million and be subject to a lock-in period of 10 years to preserve BEE credentials.
“The R564m payable... includes a premium of R149m in recognition of the benefit to Lonmin of the 10-year lock-in period.”
The Bapo would also receive a deferred royalty payment of R20m per year from Lonplats for five years after the transaction had been completed, to pay the costs of running, controlling and directing their affairs.
The company intended to fund these royalty payments from existing cash resources and/or available debt facilities.
EPL would acquire all shares in the Bapo ba Mogale Mining Company (BMC) from the Bapo.
The BMC holds the Bapo's 7.5 percent participation interest in the unincorporated joint venture in respect of the Pandora mine operated by EPL.
Lonmin agreed that it would allow the Bapo to take part in Lonplats procurement and business values activities to a minimum revenue value of R200m within 18 months after the agreement was finalised.
The Bapo transaction was subject to customary conditions, including local ministerial approval to the transfer of the ownership of the shares in BMC to EPL and the Competition Commission's approval.
A related part of the agreement was for the community and Lonmin to create the Bapo Community Local Economic Development Trust.
“The aims of the Bapo Trust will be to promote, among other things, educational initiatives and health care improvement as well as address the developmental needs of the Bapo.”
After discussions with the mineral resources department, Lonmin directors believed the Bapo transaction would increase Lonplats's BEE equity status by 2.4 percent.
The Bapo Trust transaction would add a further 0.9 percent to this status, raising Lonplats's equity status by 3.3 percent in total. - Sapa and Reuters