Impala Platinum and Sibanye-Stillwater distanced themselves from an offer for Northam Platinum on Tuesday, which means Valterra Platinum is the only company likely to have an appetite for a further 1-million ounces a year of platinum group metal (PGM) production.
Make that 1.5-million ounces in terms of Northam’s recently stated growth ambitions. If achieved — by 2032 according to the company — that would be an astonishing trajectory for Paul Dunne, CEO since 2014. When he joined the company, Northam was producing about 350,000oz of PGMs annually.
Should Valterra take over Northam, that production number would invite huge antitrust scrutiny, especially from the Chinese, who are major buyers of PGMs. As a result, the combination of businesses as described by Northam today would most likely be at the asset level (though one PGM executive says a merger of Northam and Valterra is not out of the question).
Two possibilities stand out in this regard. Northam’s deep and aged but profitable Zondereinde mine is located near Valterra’s Amandelbult, the latter a bit of a problem child for Valterra until it was recently remediated by its CEO Craig Miller. Both mines are on the western limb of the Bushveld Complex, in the Waterberg area of Limpopo.
The other is Booysendal, Northam’s newly opened mine, which sits on the eastern limb of the Bushveld Complex in the Steelpoort/Burgersfort area, near Valterra’s Mototolo/Der Brochen complex. Mototolo produced about 140,000oz of PGMs in the six months ended June. After the takeover of Glencore’s stake in Mototolo, Valterra is ramping up a combined Mototolo/Der Brochen life extension programme.
There is also potential for Northam to gain access to processing capacity held by Valterra to support its own expansion plans.
On the cards
It appears these ideas have been on the cards for a while, based on comments made by Northam head of investor relations Hurbey Geldenhuys. While they clearly make sense, it seems Northam wants to extract the best possible deal and has therefore made the conversation public.
While that may not please Valterra, which is yet to comment, the hope may be to get a company such as Ivanplats in the conversation. Ivanplats, part of Robert Friedland’s Ivanhoe Mines, is certainly of a frame of mind that would consider a big-picture takeover of Northam.
In the tightly connected world of PGMs in South Africa, Northam and Ivanplats are business partners of a sort: the two concluded a 10-year offtake agreement in 2021 under which Northam buys 50% of the PGM concentrate produced by Platreef’s Phase 1 (about 20,000t of concentrate a year).
Apart from Ivanplats, it’s hard to know whether any other party would have an obvious interest in Northam. Northam’s announcement that it intends to make itself open to proposals until December 1 provides ample time to find out.
It also serves to demonstrate that, before committing to a deal with Valterra, shareholder value will be thoroughly explored. Cross-boundary deals make sense, as demonstrated by Anglo American’s agreements in South America with Vale and Teck Resources, both of which have helped Anglo attract an improvement in its multiple.
This story first appeared in Minimgmx
