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Lonmin enters into BEE agreement

Jul 30 2014 19:37


Company Data

Lonmin plc [JSE:LON]

Last traded 7
Change 0
% Change -4
Cumulative volume 243237
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town - Platinum group Lonmin [JSE:LON] has entered into binding agreements with the Bapo ba Mogale community to meet black economic empowerment (BEE) targets, it said on Wednesday.

The company said the Bapo would waive their current statutory right to receive royalties from Lonmin's operating company Lonplats, made up of Eastern Platinum Limited (EPL) and Western Platinum Limited (WPL).

In exchange they would receive a lump sum cash royalty payment from Lonplats that would be used to subscribe for shares in Lonmin.

Pay costs

These placing shares would be to the value of R564m and be subject to a lock-in period of 10 years to preserve BEE credentials.

"The R564m payable... includes a premium of R149m in recognition of the benefit to Lonmin of the 10-year lock-in period."

The Bapo would also receive a deferred royalty payment of R20m per year from Lonplats for five years after the transaction had been completed, to pay the costs of running, controlling and directing their affairs.

The company intended to fund these royalty payments from existing cash resources and/or available debt facilities.

EPL would acquire all shares in the Bapo ba Mogale Mining Company (BMC) from the Bapo.

Ministerial approval

The BMC holds the Bapo's 7.5% participation interest in the unincorporated joint venture in respect of the Pandora mine operated by EPL.

Lonmin agreed that it would allow the Bapo to take part in Lonplats procurement and business values activities to a minimum revenue value of R200m within 18 months after the agreement was finalised.

The Bapo transaction was subject to customary conditions, including local ministerial approval to the transfer of the ownership of the shares in BMC to EPL and the Competition Commission's approval.

A related part of the agreement was for the community and Lonmin to create the Bapo Community Local Economic Development Trust.

"The aims of the Bapo Trust will be to promote, among other things, educational initiatives and health care improvement as well as address the developmental needs of the Bapo."

After discussions with the mineral resources department, Lonmin directors believed the Bapo transaction would increase Lonplats's BEE equity status by 2.4%.

The Bapo Trust transaction would add a further 0.9% to this status, raising Lonplats's equity status by 3.3% in total.

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