Anglo, Kumba to form top BEE firm

JOHANNESBURG – Miner Anglo American Plc and Kumba Resources, the iron ore producer it controls, announced a complex plan yesterday to split Kumba and form South Africa’s biggest black-owned company.

Kumba, the world’s fifth largest iron ore producer, will be split into two firms: Kumba Iron Ore and a coal and heavy minerals company, each to be separately listed on the Johannesburg Securities Exchange. The deal will allow Anglo, which now owns 66,2 per cent in Kumba, to keep a strong presence in the lucrative iron ore industry while also meeting government demands to spread more ownership to the country’s majority blacks.At least one analyst said Anglo was the main winner of the deal.”It’s a good deal for Anglo, am not very sure about the other parties, the new company.The other assets are very mediocre.Anglo has taken the jewels and left most of the rubbish,” said one sector analyst who declined to be named.”If you look at the heavy minerals, the cash flow out of that has been very difficult.I don’t see a lot of upside for the BEE guys.”Anglo’s shares in London were down 2,17 per cent at 1622 pence, while Kumba’s stock fell 1,16 per cent to 94,10 rand, largely in line with the DJ Stoxx resources index and the South African resources index respectively.Kumba Iron Ore will have an enterprise value of 14 billion rand, the companies said.The group’s non-iron assets will be bundled into a new company with an enterprise value of around 16 billion rand.It will become the country’s biggest empowerment group ahead of African Rainbow Minerals.Lazarus Zim, chief executive of Anglo South Africa, said Anglo would hold a 49 per cent stake in Kumba Iron Ore and 17 per cent in the diversified mining company.”The total economic interest will be 53 per cent,” he said.The transaction is expected to be completed in the first half of next year, hopefully in the first quarter.Kumba Chief Executive Con Fauconnier told a conference call the deal was a sound one for the new coal and metals company.”It is a diversified mining company …It will start life with two really strong legs to it, namely coal and heavy minerals – the titanium-related heavy minerals,” he said.”The core and heart of the new company as it starts life will be coal.We will be a 45-million-tonne-plus producer from day one with very exciting growth prospects to take that tonnage up quite significantly over the next few years.”BEE is a cross-sector affirmative action plan, meant to spread wealth and equity from whites to black South Africans after their exclusion during decades under apartheid.The black investor groups involved in the transaction include Eyabantu Capital, TisoGroup, women and community investor groups.They will acquire the shares in the new firm through a series of steps, with funding from commercial banks and South Africa’s Industrial Development Corporation.The 9,2 billion rand funding for the transaction will be sourced from equity, debt and preference share issues.Subject to certain conditions, the new firm will also be granted options to acquire from Anglo 100 per cent of the Namakwa Sands mineral sands project, 26 per cent of the Black Mountain zinc mine and the Gamsberg zinc project at a fixed price of 2,3 billion rand.-Nampa-ReutersThe deal will allow Anglo, which now owns 66,2 per cent in Kumba, to keep a strong presence in the lucrative iron ore industry while also meeting government demands to spread more ownership to the country’s majority blacks.At least one analyst said Anglo was the main winner of the deal.”It’s a good deal for Anglo, am not very sure about the other parties, the new company.The other assets are very mediocre.Anglo has taken the jewels and left most of the rubbish,” said one sector analyst who declined to be named.”If you look at the heavy minerals, the cash flow out of that has been very difficult.I don’t see a lot of upside for the BEE guys.”Anglo’s shares in London were down 2,17 per cent at 1622 pence, while Kumba’s stock fell 1,16 per cent to 94,10 rand, largely in line with the DJ Stoxx resources index and the South African resources index respectively.Kumba Iron Ore will have an enterprise value of 14 billion rand, the companies said.The group’s non-iron assets will be bundled into a new company with an enterprise value of around 16 billion rand.It will become the country’s biggest empowerment group ahead of African Rainbow Minerals.Lazarus Zim, chief executive of Anglo South Africa, said Anglo would hold a 49 per cent stake in Kumba Iron Ore and 17 per cent in the diversified mining company.”The total economic interest will be 53 per cent,” he said.The transaction is expected to be completed in the first half of next year, hopefully in the first quarter.Kumba Chief Executive Con Fauconnier told a conference call the deal was a sound one for the new coal and metals company.”It is a diversified mining company …It will start life with two really strong legs to it, namely coal and heavy minerals – the titanium-related heavy minerals,” he said.”The core and heart of the new company as it starts life will be coal.We will be a 45-million-tonne-plus producer from day one with very exciting growth prospects to take that tonnage up quite significantly over the next few years.”BEE is a cross-sector affirmative action plan, meant to spread wealth and equity from whites to black South Africans after their exclusion during decades under apartheid.The black investor groups involved in the transaction include Eyabantu Capital, TisoGroup, women and community investor groups.They will acquire the shares in the new firm through a series of steps, with funding from commercial banks and South Africa’s Industrial Development Corporation.The 9,2 billion rand funding for the transaction will be sourced from equity, debt and preference share issues.Subject to certain conditions, the new firm will also be granted options to acquire from Anglo 100 per cent of the Namakwa Sands mineral sands project, 26 per cent of the Black Mountain zinc mine and the Gamsberg zinc project at a fixed price of 2,3 billion rand.-Nampa-Reuters