Paul Dunne. Picture: MARTIN RHODES
Paul Dunne. Picture: MARTIN RHODES

Northam Platinum has bought more listed Zambezi Platinum preference shares that it issued in a R4bn empowerment transaction in 2015.

Northam CEO Paul Dunne has repeatedly said the company is unlikely to pay dividends, preferring to buy back the preference shares with excess cash, thus reducing its exposure to a complex instrument.

The JSE-listed preference shares, due for redemption in cash an/or shares in May 2025, attract dividends equal to the prime lending rate in SA plus 3.5% calculated on a daily basis and compound annually.

In its interim results, Northam noted the Zambezi preference shares showed up as a R10bn liability, while dividends paid towards the shares amounted to R612m.

“The acquisition by Northam of Zambezi preference shares will reduce the Zambezi preference share liability and accumulated preference share dividends recognised in Northam’s consolidated financial statements,” Northam said.

Northam bought 4-million of these preference shares in November 2016 and has recently added to that purchase. Northam now owns 5.7-million, or 3.6%, of the Zambezi preference shares, which it estimates is worth nearly R404m.

One of the major sellers of the shares over the past 12 months was Coronation Asset Management, which through investments by its clients controls a stake of about 10% in Northam. In the latest transaction, Northam will pay Coronation R24m, or R70.69 per preference share, for about 342,000 shares.

The inclusion of the preference shares in Northam’s results muddies the waters about how the company is performing with its Zondereinde and Booysendal mines, with the company showing a post-tax loss of R64m in the interim period to end-December. Before accounting for the preference share dividends, Northam posted R796m in profit.

At Tuesday’s price of R73 each, the Zambezi shares had a market capitalisation of R11.67bn.