Platinum mining major Lonmin has entered into a deal with the Bapo ba Mogale traditional community (Bapo) to help its South African subsidiaries meet the black economic empowerment (BEE) target in the country.

Upon completion of the deal, Lonmin will make a royalty payment of ZAR20m ($1.87m) in cash and will provide shares worth ZAR564m ($52.7m) annually to Bapo for five years.

In exchange, Bapo will waive its rights to collect royalties from Lonmin subsidiaries, Eastern Platinum and Western Platinum, for mining on land owned by the community.

The deal also allows Eastern Platinum to increase its share in the Pandora joint venture (JV) to 50%, by acquiring Bapo ba Mogale Mining’s sole asset of 7.5%.

"The deal will increase the BEE equity…to 26%, the target set by the South African Government for companies to meet by the end of this year."

Lonomin CEO Ben Magara said: "It is Lonmin’s first priority to work in the interests of all our stakeholders.

"We are pleased to have reached an agreement as this is testimony to developing a constructive relationship with the Bapo ba Mogale."

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By GlobalData

Lonmin also plans to implement an employee share ownership plan and a community share ownership trust for local communities near its Marikana operations.

The deal will increase the BEE equity ownership from 18% to 26%, the target set by the South African Government for companies to meet by the end of this year.

Bapo CEO Kgosi Bob Mogale said: "I believe this agreement represents the most sustainable and fair way forward, and I hope that as well as bringing financial benefits to our people it helps to build stronger bonds between the Bapo and Lonmin."