Platinum slump hits Afripalm

2012-08-25 09:50

Lazarus Zim’s investment vehicle feels pressure of declining Northam share price, weak demand for commodities

The crown jewel in businessman Lazarus Zim’s shrinking empire appears to be in trouble.

The serial deal maker’s investment vehicle, Afripalm, and Mvelaphanda Holdings, owned by presidential hopeful Tokyo Sexwale, have seen a big chunk of their stake in platinum miner Northam Platinum being cut heavily after a big drop in Northam’s share price and platinum prices.

A statement released by the platinum producer said Afripalm and Mvelaphanda shareholding will be reduced to 16% from 26% after lenders that financed the purchase of the stake attached some of the shares due to the breach of debt covenants triggered by the share price fall.

The statement reads: “In terms of the BEE financing agreements, two of Northam’s BEE shareholders, namely Afripalm and Mvelaphanda, pledged the Northam shares held by them as security for the funds provided to them.

“Accordingly, the lenders to the BEE shareholders have exercised their claims over the affected shares.”

One known lender which may have attached the shares is Nedbank Group’s investment arm, Nedbank Capital.

In 2008, Afripalm and Mvelaphanda paid R4 billion to increase their stake in Northam to 63% from 22%, thanks to Nedbank Capital’s R2.5 billion injection into the deal. The balance was financed from black investors’ pockets.

The stake was whittled down to 26% after black investors sold down their shares to repay their debt.

Nedbank Capital declined to say whether it was going to sell the shares it claimed from Zim and other black investors to recover its loan.

Northam Platinum is not the only mining firm that has seen its share price take a knock from platinum woes.

Angloplat, Implats and Aquarius have had their backs against the wall due to the weak demand for commodities, which has wiped out profit, and led to a drop in output and job losses.

Platinum prices have fallen 20% in the past year to $1 394.49 (R11 624) an ounce amid depressed demand from the struggling European car industry, which uses the metal in catalytic converters.

The metal was under pressure this week after the world’s third-largest producer, Lonmin, shut its Marikana mine in Wonderkop near Rustenburg in North West due to violence caused by a feud between rival unions. The violence claimed 46 – including two police officers – lives at the mine.

The restructured BEE shareholding in Northam means that black investors will see the value of their shares diminish from R2.6 billion to R1.6 billion.

The platinum company has 382.5 million shares in issue, which are valued at R10.2 billion, according to the latest JSE figures. When the deal was completed in August 2008, the share price was trading at about R46, but it has since dropped to about R26.

Before the restructuring, Zim’s Afripalm owned 11% of Northam Platinum.

Through black-owned Unipalm, Zim invested in property firms Growthpoint and Pinnacle Growth Point, the Gupta family-owned computer maker Sahara Computers, fixed-line operator Telkom and advertising agency DraftFCB. But that he has pulled out of Unipalm implies he no longer has exposure to Growthpoint, the owner of South Africa’s most valuable real estate, V&A Waterfront, in Cape Town.

Zim did not respond to text messages from City Press this week and last week.

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