Following the announcement that PPC would sell a 6.5% stake to employees and black investors in a transaction valued at R1.1-billion, CEO Paul Stuiver said on Wednesday that the JSE-listed company was looking to expand its mining operations in South Africa.
“The key reason for the black economic-empowerment (BEE) transaction was to comply with requirements of the Mining Charter,” he said in a conference call.
The broad-based black economic-empowerment (BBBEE) transaction, the group’s second in four years, entailed the placing of an additional 39.3-million ordinary shares, of which 68% would be issued to staff, 27% to PPC’s existing strategic black partners and 5% to a new trust focusing on black women groups in areas where the company operates.
This would increase the direct black ownership of the PPC group to 20.8%.
“PPC’s mining operations are often underestimated, but we have ten mining operations in South Africa. We mine a total of about 20-million tons of material a year,” Stuiver said.
Noting that these were “quite sizable” operations, he said that the company also had about ten mining licence conversions pending. “In principal agreement with the Department of Mineral Resources, we see this transaction taking us to a stage where our mining licences are converted,” Stuiver said.
The BEE transaction would also allow PPC to streamline its corporate structure by creating separate South African and international operating entities, thereby aligning the structure with its strategy to expand its footprint on the African continent.
“Aligning our corporate structure with our strategy will result in greater efficiency and better risk management. We were unable to do this prior to converting our South African mining rights.”
The holding company, Pretoria Portland Cement Company Limited would also be renamed to PPC Limited.
Meanwhile, Stuiver said the latest transaction was structured for the benefit of those parties closest to the business. “We were particularly keen for our 2 400 South African employees to participate at a significant level and this transaction will result in them owning about 7% of the PPC group.”
All permanent employees of PPC in South Africa would participate. A portion of shares has been set aside for new employees joining the company during the next three years.
PPC’s strategic black partners are the same as those that participated in the 2008 BBBEE transaction, namely Peu, Nozala, Portland Consortium and Palama Cement Consortium (formerly Capital Edge).
The transaction is being facilitated through notional vendor funding at a fixed rate of 6% over a seven-year period. The company would issue new shares at once cent a share and no capital would be required from the participations other than the nominal share value to be paid by the strategic black partners.
The BEE parties would be restricted with regards to selling their shares in the seven-year period of the transaction.
PPC would be cancelling 20-million treasury shares prior to implementing this phase of the BBBEE transaction. These shares were purchased by PPC in order to mitigate the potential dilution to shareholders during the first phase of the transaction.
PPC traded at R26.27 a share on Thursday morning, down 1.20% from the previous day’s closing price of R26.59 a share.