SOUTH AFRICA – Northam Platinum, South Africa’s fourth-largest platinum producer, has indicated that it is continuing with its strategy to buy back shares from its black empowerment partners by increasing its holding in listed Zambezi Platinum preference shares to 87.5 percent after acquiring an additional US$73.2 million in Zambezi preference shares.
Northam said it had reached an agreement with the Public Investment Corporation to purchase 9.87 million Zambezi preference shares at US$6.51 per Zambezi preference share, for a total cash consideration of US$64.3 million.
The group, which held 80.4 percent of Zambezi preference shares, said since December 2020, had also acquired 1.5 million Zambezi preference shares bringing the number of newly acquired preference shares since last year to 11.4 million.
Northam said the acquisition was not subject to any conditions precedent and would be funded from the group’s internal cash resources.
The strategy to increase holding in additional shares in Zambezi preference shares aims to reduce Northam’s potential liability in 2025 when its black investors are permitted to divest.
Northam would need to pay the difference if the shares fell below their initial acquisition price of US$2.73 each.
Northam, which has been hindered from paying dividend, has said previously that it preferred to buy back preferred shares with excess cash.
“The strategy to increase holding in additional shares in Zambezi preference shares aims to reduce Northam’s potential liability in 2025 when its black investors are permitted to divest”
“As stated in the previous announcement, Northam’s acquisition of Zambezi preference shares will reduce the preference share dividend expense and liability included in Northam’s consolidated financial statements, as well as Northam’s potential financial exposure under the guarantee it provided in favour of the holders of Zambezi preference shares,” Northam said.
Zambezi Platinum issued the preference shares to buy a 31 percent stake in Northam in 2015 in a US$266.3 million empowerment transaction that was initiated to establish a sustainable historically disadvantaged South Africans shareholding.
To finance the deal, Zambezi Platinum issued 159.9 million cumulative redeemable preference shares at US$2.73 per share.
Anchor Capital’s investment analyst, Seleho Tsatsi, said in May 2025 Zambezi must redeem the preference shares with cash or Northam shares.
“Northam has guaranteed the shortfall, meaning if the Northam share price is less than a certain level in May 2025, Northam must settle the shortfall with either cash or Northam shares. Northam shareholders thus face potential dilution if Northam has to issue more shares to settle the structure. So, the preference share in effect represents a liability for Northam. Northam has been acquiring Zambezi prefs for some time now, reducing the size of that liability,” said Tsatsi.
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