Indigenisation To Affect Platinum's Asset Value

NAV describes the value of an entity’s assets less the value of its liabilities.
Three foreign PGMs – Impala Platinium, Acquarius and Anglo American Platinum (Amplats) -have operations in Zimbabwe. 

Impala has 87% in Zimplats. Acquarius and Impala jointly own Mimosa in Zvishavane. Amplats owns Unki Mine in Shurugwi. 

The Indigenisation regulations gazetted last year stipulate that at least 51% shareholding of all foreign owned companies with a value of US$500 000 and above should be in the hands of locals within five years.

Mining companies had already submitted proposals on how it intended to accommodate locals. The indigenisation crusade is being seen by some analysts as a campaigning tool for possible elections this year or next year.

According to a report by Deutsche Securities, Impala and Acquarius lose more as their Zimbabwean assets contribute a huge chunk to net asset value.

“We view Implats as the most exposed to Zimbabwe’s risk: together, Zimplats and Mimosa account for 17% of Impala’s NAV of operating assets compared with 16% for Acquarius and 4% for Amplats, Deutsche Securities said.

“On our FY12 [Full Year 2012], Zimbabwe accounts for 13% Impala’s revenue and 23% of its EBITDA (earnings before interest depreciation taxation and amortisation).

EBIDTA is an approximate measure of a company’s operating cash flow based on data from the company’s income statement.

It said this is slightly lower than the numbers for Acquarius but “with the ramp up of Zimplats, we estimate that Impala will be the most exposed
of the three by 2014.

Deutshe Securities said for FY12 it forecasts the percentage of revenue from Zimbabwe operations to range from 2,5% (Amplats) to 19,5% for Acquarius.

“The percentage of EBIDTA for FY12E ranges from 5,1% (Amplats to 24,8% (Acquarius). Looking at FY14, by which time the current expansion at Zimplats and Unki will have been completed, we estimate that Zimbabwean operations will account for 14% of group revenue and 26% of EBIDTA for Impala, 18% of group revenue and 21% of EBIDTA for Acquarius ans 2% of group revenue and 5% of EBIDTA for Amplats,” Deutsche Securities said.
While mining firms had submitted plans on how they intended to be compliant with the law, Zimbabwe had not shown its proposals on how locals would buy the shareholding raising fears that the programme was akin to nationalisation. According to the regulations, foreign owned companies should parcel the stake to community trust, employee trust and the wealth fund, National Indigenisation and Economic Fund.