It took three long years of negotiations but Anooraq Resources (arq-v, ano-x) has finally inked a deal that will transform the Canadian junior exploration company into a significant platinum metals producer with control of the third-largest resource base in South Africa.
Under the deal, Anglo Platinum (AGPPY-O, ANP-L, ANANP-J) will sell Anooraq 51% of Lebowa Platinum Mines for C$530 million. Anglo Platinum currently owns 100% of Lebowa, which is located on the northeastern limb of the prolific Bushveld complex.
Anooraq will also receive an effective 1% controlling interest in its 50-50 joint-venture projects with Anglo Platinum at the Ga-Phasha, Boikgantsho and Kwanda platinum group elements projects.
Anooraq’s interests will be held through a holding company called Lebowa Holdco, in which Anooraq will own a 51% stake and Anglo Platinum 49%. The deal is likely to be completed in the first half of 2008.
After the deal goes through, Anooraq’s attributable resource base will more than double from its current 48 million oz. combined platinum, palladium, rhodium and gold, to 104.6 million oz.
Current production at Lebowa attributed to the newly structured deal is 103,300 oz. combined platinum, palladium, rhodium and gold a year, gearing up to 219,300 oz. by 2012.
“We’re going from an exploration development company on day one to a fully integrated platinum production company on day two,” says Joel Kesler, Anooraq’s business development officer, from Johannesburg.
The deal unlocks control from Anglo Platinum and creates a diversified major platinum portfolio that includes production, development, and exploration ounces, Kesler explains. And it gives Anooraq immediate access to cash flow from the Lebowa mine.
The valuations and pricing were also very attractive.
“If you look at it on a total resource base, we’ve bought these ounces from Anglo Platinum for less than US$9 per oz., which on a comparable basis, is very attractive for the platinum metals space,” he says. “Not only is the dollar-per-ounce valuation attractive, but also the majority of value attributable to Lebowa is embedded in the cash flow generative portion of the existing mine’s operations. So we’re buying cash flows and an enormous resource.”
Kesler notes that the deal also unlocks technical skills from Lebowa and enhances synergies between the adjacent projects of Lebowa and Ga-Phasha. Ga-Phasha is currently at a prefeasibility stage of development.
For Anglo Platinum, the deal was necessary in order to get its mining title conversion to satisfy South Africa’s 10-year targeted Black Economic Empowerment (BEE) ownership levels under the country’s new Mining Charter and Mineral Resources and Petroleum Development Act. To do that, Anglo Platinum needed to transfer assets into the hands of a BEE company. And it chose Anooraq, with which it already operated several joint-venture projects.
Anooraq acquired BEE status in September 2004. Pelawan Investments, a 100% broad-based Historically Disadvantaged South African company, owns 65% of Anooraq, together with 167 million BEE warrants exercisable up until Dec. 31, 2008.