A community forum in South Africa’s platinum belt has instructed lawyers to challenge the approval of an opaque deal converting their platinum-mining royalty into shares in Lonmin plc, owners of the Marikana mine in North West Province.
The ministers of Rural Development and Land Reform and of Mineral Resources signed a contested agreement on Friday swapping the lifetime royalty rights of the Bapo-ba-Mogale traditional community in North West Province for Lonmin shares.
The value of the deal, which has cost the Bapo their right to a 12% royalty on profits from Lonmin’s Marikana mines and their 7.5% share of the Pandora Joint Venture with Lonmin and Anglo Platinum, has plunged by more than R100-million since some members of the community voted to approve it on July 29.
The deal was worth a total of R664-million at the end of July. Though analysts see the share price stabilising, at midday on November 11, the Bapo’s new wealth was down with Lonmin’s share price to just R552.74-million.
Abbey Mafate of the Bapo-ba-Mogale Liaison Committee said on Tuesday the group had given instructions to the Legal Resources Centre to proceed with an application to review the decisions of the two ministers and of the July 29 community meeting at which it was purportedly approved.
Mafate said the community had not been given enough information to know how they would benefit from the deal or whether it comprised fair value for the surrender of the existing royalty right. He said the community meeting called to approve the deal was not properly constituted in terms of customary or statutory law.
He said the committee wanted the 10 secret agreements that comprise the royalty to equity conversion released for public scrutiny before a renewed consultation process designed to allow the entire community to make a considered decision.
Gugile Nkwinti, the minister of Rural Development and Land Reform, signed as trustee for the community. Mining minister Ngoako Ramatlhodi signed because the transaction involves a variation to the company’s 1969 licence to mine beneath the Bapo farms near Rustenburg.
Consultation on the transaction is required in terms of the Interim Protection of Informal Land Rights Act, which protects de facto land rights against unilateral decisions by nominee owners – in particular the state.
The rationale of the act is that under apartheid legislation, most land in the former Bantustans is registered in the name of the state and not the actual owners.
Mafate and several other leaders from the community’s eight villages say they have a mandate from more than 2000 people who have signed a petition opposing completion of the deal until they know how the values were calculated and who it will benefit.
“We want a deal with Lonmin, but we want a good deal. We want an honest deal, a fair share, an open negotiation,” the Liaison Committee said in a memorandum to the community this week.
LRC lawyer Henk Smith said the centre was preparing papers to take the transaction on review both on the basis that the community meeting on July 29 did not have the authority to approve the deal and in terms of customary law concerning community approval of transactions on land that is communally owned.
Lonmin acknowledged the threat of litigation in its annual results presentation on Monday.
The company said it had agreed to give the community a 2.25% share of Lonmin as a step towards the completion of its obligation to ensure 26% black ownership by the end of the year.
Shanduka, the black economic empowerment company led by Cyril Ramaphosa until he became deputy president earlier this year, owns 18 percent through Incwala Resources, which it controls. Lonmin proposes to complete its26% target with community trusts and an employee share scheme.
Lonmin have put more than $300-million at risk in an empowerment transaction with Shanduka and have received nothing in return. On the other hand, the Bapo have traded everything they had for a much smaller share in the Lonmin company.
Lonmin loaned Ramaphosa’s company $304-million in May 2010 to buy a 50.3% stake in Incwala, which is Lonmin’s empowerment vehicle. With no ordinary dividends declared since then, Shanduka has been unable to service or to repay the loan.
Lonmin reported on Monday however, that it had given Shanduka advances on possible future dividends of over R900-million since the loan was made.
Preparing the ground for a possible write-off of Shanduka’s debt this week, the company reported an impairment loss of $80-million because the value of Shanduka’s Incwala holding – the only collateral for its Lonmin loan – had dropped from $399-million in 2013 to $337-million this year. The loan is scheduled for repayment in July.
If Lonmin’s share price does not recover strongly enough over the next nine months to wipe out the impairment loss and enable Shanduka to pay for its stake in Incwala, it could cost the company heavily to keep its main empowerment partner in place. Meanwhile, Lonmin’s reluctant deal with the Bapo host community has cost it nothing.
For the Bapo-ba-Mogale, the best hope may be a court order to Lonmin to renegotiate in a more consultative and transparent way. Under the current deal, the Bapo will be rich only on paper and the majority of the 35000-strong community will see nothing at least until the loss-making company resumes paying dividends.