Mineral Commodities (MRC) is planning to increase its stake in Mineral Sands Resources (MSR), which owns the Tormin mineral sands operation in South Africa, to 69%.
MRC has so far developed and operated the Tormin project through its 50% stake in MSR.
Empowerment partner Blue Bantry, which is owned by individuals who are South African Historically Disadvantaged Persons (HDPs), holds the remaining 50% stake in MSR.
MRC and Blue Bantry have now signed formal agreements to restructure their holding in the former.
The agreement complies with the recommendations of the 2018 Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry.
The 2018 Mining Charter recommends a minimum of 30% Broad-Based Black Economic Empowerment (B-BBEE) shares or equity equivalent benefit.
In a press statement, MRC said: “The company formed the view that dilution of the interests of its B-BBEE partner in MSR through existing historical shareholder and loan agreements would be inconsistent with the relationship between the parties and the intent of the 2018 Mining Charter without some form of consideration.”
In light of this, MSR is planning to adopt a recoverable interest methodology to decide the amounts owing, given that MRC is likely to remain the MSR’s sole external funding source.
Under the new methodology, MRC could recover contributed capital by withholding 80% of available dividends payable to participants until its capital contribution is fully repaid.
MRC has agreed to waive off long-term loans and other amounts owed to it by Blue Bantry in exchange for reducing the latter’s interests in MSR from 50% to 21%.
Furthermore, the entities have agreed that Blue Bantry will be entitled to receive “11.3 million fully paid ordinary shares in the capital of MRC, together being in consideration for amounts that would have been payable to Blue Bantry if the Recoverable Interest methodology had been applied since the inception of the Tormin operation”.
The restructuring agreement is subject to the satisfaction of conditions such as the receipt of all required regulatory approvals.
Upon the restructure of MSR, MRC’s subsidiary MRC Resources will own a 69% stake in MSR while Blue Bantry will hold a 21% stake.
MRC interim CEO Adam Bick said: “We look forward to welcoming our B-BBEE Partner Blue Bantry as a shareholder in MRC and our [historicaly disadvantaged] employees as shareholders of MSR, and to sharing the benefits of not only Tormin operations but the company’s overall capital growth with our new stakeholders.”