Atlatsa Resources has entered into a letter agreement dated 21 July 2017 with Anglo American Platinum outlining key terms agreed in relation to a two-phased transaction in terms of which Atlatsa will implement:
- a care and maintenance strategy for Bokoni mine (Phase 1); and
- a financial restructure plan for Atlatsa Resources and its subsidiaries conditional upon Anglo American Platinum acquiring and including into its adjacent mining rights the resources specified in the Central Block and Kwanda North prospecting rights (Phase 2), (collectively, the 2017 Restructure Plan).
The salient terms of the letter agreement are as follows:
- Atlatsa Resources to place the Bokoni Mine on care and maintenance
- Anglo American Platinum to fund all costs associated with the care and maintenance process up until 31 December 2019
- Anglo American Platinum to suspend servicing and repayment of all current and future debt owing by Atlatsa Group until 31 December 2019
- Anglo American Platinum acquiring and including into its adjacent mining rights the resources specified in the Kwanda North and Central Block prospecting rights for a cash consideration of R300 million
- Subject to the implementation of the asset disposal, Anglo American Platinum to capitalise and/or write off all debt owing by Atlatsa Group and Bokoni Platinum Mines to Anglo American Platinum, currently amounting to R 4.2 billion, including such further debt incurred during the care and maintenance period until 31 December 2019
- Atlatsa Resources and Anglo American Platinum to retain their 51% and 49% respective shareholdings in the Bokoni JV
Background to and rationale for the 2017 Restructure Plan
Notwithstanding various attempts since 2014 to restructure the Bokoni mine through, inter alia, shaft closures and other measures in order to achieve profitability, Bokoni mine’s operations remain cash negative after capital expenditure.
The mine has incurred negative cash flow of approximately R 500 million for the first six months of 2017.
In recent months Atlatsa Resources and Anglo American Platinum, together with mine management, have continued to investigate a range of further mine re-configuration options.
All of the options assessed demonstrate significant cash outflows in the short to medium term with material execution risk. The immediate to medium term outlook for Bokoni mine remains negative, given the current weak PGM pricing environment which is expected to remain under pressure for the foreseeable future.
In addition to investigating the various mine re-configuration options, Atlatsa Resources and Anglo American Platinum have also actively investigated various potential funding and corporate ownership alternatives, including seeking to introduce new funding partners and/or a disposal of Bokoni mine.
However, given Bokoni’s current operational challenges, continued operational losses and negative cash generation, the depressed PGM environment, the negative medium term PGM pricing outlook and Atlatsa Group’s significant debt levels, attempts to implement such alternatives have proven unsuccessful.
In the circumstances, Atlatsa Resources and Anglo American Platinum are no longer able to continue funding losses at the mine with no reasonable short to medium term turnaround prospects.
Atlatsa Resources and Anglo American Platinum have therefore agreed to implement the 2017 Restructure Plan as the most appropriate strategy, having regard to long term asset value preservation and potential future sustainability of Bokoni mine.
Bokoni mine care and maintenance and debt standstill
Atlatsa Resources will place the Bokoni mine operations on care and maintenance as soon as reasonably possible. Anglo American Platinum has agreed to fund, via a loan account to Bokoni mine, all once-off costs associated with placing the mine on care and maintenance, as well as ongoing care and maintenance costs, up until 31 December 2019.
Atlatsa Resources will also, as a consequence, restructure its corporate head office and associated overhead costs in order to right size for a business which will hold a single asset on care and maintenance, including reviewing the sustainability of its listings on various stock exchanges.
Anglo American Platinum has agreed to suspend servicing and repayment of all current and future debt incurred by Atlatsa Group and owing to Anglo American Platinum and its related entities until 31 December 2019. Upon implementation of Phase 2, all debt incurred during the debt standstill period will also be capitalised and/or written off, in accordance with the debt write off.
Atlatsa Resources and Anglo American Platinum have embarked on a comprehensive stakeholder engagement strategy associated with the care and maintenance plan.
During the care and maintenance period Atlatsa Resources and Anglo American Platinum will continue to review various alternatives in respect of the mine’s future sustainability and revisit its care and maintenance status, depending on future circumstances.
Conditional sale of Kwanda North and Central Block prospecting rights and debt write off
Atlatsa Resources has accepted a conditional offer from Anglo American Platinum to acquire the Central Block and Kwanda North prospecting rights for a cash purchase consideration of R300 million subject to, inter alia, the following conditions precedent:
- conclusion of definitive transaction agreements; and
- relevant regulatory approvals for a transaction of this nature, including those required by the Mineral and Petroleum Resources Development Act, 28 of 2002 and registration by the Mineral and Petroleum Titles Registration Office to complete Anglo American Platinum acquiring and including into its adjacent mining rights the resources specified in the Central Block and Kwanda North prospecting rights.
Should the asset disposal be implemented, Anglo American Platinum has undertaken to, inter alia, implement the debt write off which will reduce Atlatsa Group’s debt levels to R nil.
Possible future position following implementation of the 2017 Restructure Plan
Subsequent to implementation of the 2017 Restructure Plan and on the basis that the transactions set out above, including the asset disposal and the debt write off, have been successfully implemented:
- Atlatsa Resources and Anglo American Platinum will retain their 51% and 49% respective shareholdings in the Bokoni mine
- Atlatsa Group and Bokoni mine will be debt free; and
- Atlatsa Resources will receive R 300 million in cash as consideration for the asset disposal
Both Anglo American Platinum and Atlatsa Resources will continue to investigate opportunities for either or both parties to divest of their interests in the Bokoni JV.