04 March 2005
	TOP DEALS PREFERENCE SHARES - INCWALA Birth of a new natural-resources player By Itumeleng Mahabane Incwala

Late last year Impala Platinum sold its 27% stake in Lonmin back to the group in a deal that included an empowerment transaction that gave black groups an 18% stake in Lonmin. But the parties to the deal had to be patient while some concerns were addressed. There were two main reasons for the uncertainty. First, the minerals & energy department was concerned that the traditional mining companies involved in the deal would both receive points for the same transaction. However, the department overlooked that in the end. The second concern was about the level of debt that would be created in the new company, which would acquire the assets. The steps of the transaction : Incwala Resources is created. Before the transaction, Implats owned 27,1% of Lonplats. In terms of the agreements signed on September 6 2004, Lonmin acquired a net 9,1% of Lonplats for US$282,6m and Incwala Resources, through a wholly owned subsidiary Incwala Platinum, acquired the remaining 18% stake in Lonplats for $480,2m . The financing for the transaction was provided by a variety of partners including the vendors (Implats), Lonmin, the Industrial Development Corp and various local and international financial institutions. The advantages of the transaction: Based on Lonmin's purchase price of 9,1% of Lonplats, Incwala Resources is acquiring its stake in Lonplats at a discount. The Lonplats acquisition and related financing creates scope for the formation of a significant black-controlled player in the natural resources industry. Incwala Resources has acquired one of the premier platinum assets in the world. The gearing in the transaction (in terms of the preference shares and the vendor finance) is more than 50% of the total transaction value. Depending on Lonmin's operational performance and dividend policy, this level of gearing creates scope for significant value creation for all Incwala Resources' ordinary shareholders.