Mvela set to wind down and close up

MVELAPHANDA Resources has abandoned any acquisition hopes with outsiders and is again set on the final unbundling and sale of assets to be followed within a few months by the company's closure.

Mvela is to sell its remaining shareholding in Gold Fields, which will allow it to repay the R3.1-billion remaining of the loan raised to acquire that shareholding and leave it with between R1-billion and R1.5-billion in cash.

That will cover any possible rights issue by Northam, the 63percent-owned platinum miner, in September on completion of a bankable feasibility study that gives Northam the green light to go ahead with the Booysendal project that it had originally acquired from Mvela.

Once this is done, the idea is to distribute the Northam shareholding and any surplus cash to Mvela's own shareholders, including 42percent shareholders Mvelaphanda Holdings and Afripalm, and then close down.

It might appear that Mvela founder Tokyo Sexwale's original dreams of creating an independent and diversified BEE mining group has failed.

But Mvela chairman Lazarus Zim is clear that, when all is cut and dried, the two black empowerment entities will have a combined 27percent of Northam and, uniquely, that they will be the only black economic empowerment companies with direct influence on and access to dividend flows of a mine-to-market platinum company. In its last financial year, Northam paid dividends of just over R1-billion.

Zim adds that flattening the pyramid will unlock the 27percent discount to net worth that the stock market attributes to Mvela's shares.

Essentially, this discount reflects investors' view that management's contribution was less than zero - a common occurrence for decades with valuations of South African mining houses.

Booysendal is a shallow deposit estimated to contain about 103 million ounces of platinum group metals.

Northam favours a modular development approach, starting with production of an annual 120000 ounces or so of PGMs from the UG2 reef. This, the company said, could be replicated, depending on available power and market conditions. The first 120000 ounces will come from a decline shaft and infrastructure costing about R2.5-billion, with a subsequent three shafts to open more UG2 and Merensky reef horizons coming in at an estimated R1.5-billion apiece.

In February, Northam said that it should be able to finance the development of Booysendal through internal cash-flow retentions and medium-term loans. That may still be the case, but Mvela is planning on participating in a rights issue.