SOUTH AFRICA – Johannesburg Stock Exchange -listed Patinum Group Metals (PGM) miner, has bought Zambezi preference shares from the Public Investment Corporation (PIC) for US$87 million as it pursues its strategy of returning value to shareholders.

Northam, which operates the Booysendal and Zondereinde mines, said in a press statement that it had agreed to acquire 13.8 million Zambezi preference shares from the PIC at US$6.38 a Zambezi share

The group also bought US$20 million of Zambezi shares in a separate tranche – taking its holding of Zambezi preference shares in the empowerment investment it helped to create to 80.4 percent.

Chief executive Paul Dunne said Northam was pleased to return a further US$107 million of value to shareholders through the purchase of Zambezi preference shares, increasing Northam’s holding to roughly 80.4 percent.

“Northam’s acquisition of more than 80 percent of Zambezi preference shares represents a significant step in pursuit of the company’s previously stated intention to accelerate the maturity of the Zambezi transaction”

“This strategy continues to positively impact future earnings and shareholder value creation,” Dunne said.

The acquisition of the shares comes as Northam benefits from strong metal prices and the resilience of its operations during the national lockdown.

In October, Northam bought 37 million Zambezi preference shares for USS$234,167 million, taking its holding in the shares to more than 111 million, representing 70 percent of all Zambezi preference shares in issue.

The group has to date returned US$374,666 million to shareholders by way of purchases of Zambezi preference shares and the average premium paid on these purchases had been 2.5 percent, it said previously.

Northam embarked on a strategy to purchase Zambezi preference shares two years ago, citing that it was the most efficient mechanism for returning value.

Northam’s rationale for acquiring the shares is to reduce the preference share dividend expense and liability included in the annual financial statements, as well as its potential financial exposure under the guarantee it provided to holders of Zambezi preference shares, should the guarantee be called upon.

According to the group’s 2020 annual report during the year under review, the reduction of the share dividend expense in the consolidated financial statements amounted to US$20 million.

“This benefit will increase in the future, as a result of the cumulative nature of these Zambezi preference shares,” said the group.

In 2015, Northam launched Zambezi Platinum, an empowerment transaction, to not only empower the group and secure its licence to operate, but it also injected US$308 million of capital into the group, allowing it to commence with its 10-year growth strategy.

Zambezi Platinum holds a 31.4 percent interest in Northam’s issued share capital, representing 159 905 453 shares.

Northam said in the annual report that every Zambezi preference share that it purchased in the market mitigated risks for shareholders at the end of the 10-year lock-in period, which ends in May 2025.

It would also reduce the number of Northam shares in issue should Zambezi redeem the Zambezi preference shares held by Northam through a distribution of ordinary shares to Northam.

It said previously that the Zambezi preference shares acquisitions were through internal cash resources.

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