AMN - SOUTH AFRICA: Lonmin to buy remainder of Pandora

Lonmin has agreed to buy the remaining 7.5% of the Pandora Joint Venture in the Bushveld Igneous Complex in South Africa for R45.565 million from Northam Platinum's subsidiary Mvelaphanda Resources. The JV mines PGMs from the UG2 and Merensky reefs with all ore produced sold to Lonmin for processing and refining.

On November 11, 2016, Lonmin bought Anglo American Platinum's 42.5% equity interest in the JV and is currently obtaining regulatory approvals for this acquisition, which it anticipates to complete by the end of the year. Completion of the two transactions will result in Lonmin increasing its ownership in the Pandora JV to 100%.

The acquisition will allow Lonmin to consolidate its position in the shallow and high-grade mineral resource, it said.

The Pandora JV area is contiguous with Lonmin’s existing Eastern Platinum (EPL) operations, relies on Lonmin’s mining and processing infrastructure, and is operated by EPL. Pandora JV contributed 32,509 platinum ounces to Lonmin in the 2016 financial year.

Lonmin will be able to access a portion of the Pandora mining right from its adjacent Saffy shaft. This access will allow Lonmin to defer R1.6 billion of capital expenditure at the Saffy shaft over the period from 2018 to 2020 while maintaining full production at that shaft, as well as a further R1 billion of capital expenditure deferral thereafter.

In the longer term, Lonmin will also have the option to optimally develop this shallow, high-grade resource as and when supported by market conditions.

In addition to the cash payment, Lonmin will refund the value of any cash calls paid by Mvelaphanda to the Pandora JV from 1 January 2017 and completion of the transaction. The company’s current expectation is that the aggregate cash calls payable to Mvelaphanda will be between approximately R6 million and R8 million depending on the timing for completion of the transaction, subject to a maximum cap.

Lonmin’s CEO Ben Magara said, "This is an excellent strategic fit for Lonmin, which increases our exposure to a valuable asset with long-term development potential and allows us to maintain production levels at Saffy while significantly reducing our capital expenditure requirements at this operation over the short- and medium-term.”

www.lonmin.com