World Bank Body To Put $150m Into Lonmin

Published by MAC on 2007-03-14
Source: Resource Investor

World Bank Body to Put $150M Into Lonmin

By Rob Rose, Resource Investor

14th March 2007

JOHANNESBURG (Business Day) -- The World Bank's private sector arm, The International Finance Corporation (IFC), took its largest stake in a JSE-listed company yet when it said yesterday that it would spend R370 million ($49 million) to buy shares in platinum company Lonmin.

This pushes the IFC's total investment in South Africa to date over the R2 billion ($267 million) mark, underlining the growing influence that this often-ignored organisation has in the corporate sector.

The IFC's $49 million investment in Lonmin shares was announced as part of a $150 million package for the platinum company, marking the institution's largest investment in South Africa to date.

Lonmin plans to use the $100 million loan, which is repayable over 10 years, to fund the involvement of communities and empowerment groups in Lonmin's various projects, which are mostly situated in Mpumalanga.

Black-owned groups will be able to use these funds to buy an interest in Lonmin's various platinum projects, without having to raise the finance themselves from commercial banks.

Lonmin CEO Brad Mills said the plan was to use the cash to create "thriving communities" around Lonmin's projects so that when the platinum was depleted and the miners left, the communities would be "comfortably middle-class" and able to support themselves.

"We intend to use 100% of this facility to facilitate partners in our business," Mills said.

Lonmin would use part of the cash to build 5,000 houses in the next five years for community members, with 600 scheduled to be built this year.

Rashad Kaldany, the IFC's director for oil, gas mining and chemicals, said his organisation would be willing to pump money into other mining companies looking to improve the lives of people living on the mines.

"The broad-based effort (at community development) is a model than can and should be replicated in Africa and around the world," he said.

Kaldany also revealed that this was the IFC's largest investment yet in the JSE. These investments were important to "build relationships with companies," he said.

"We want a blend of (loans) and investments in this country that will help us cement longer-term relationships."

Most of its investments in South African companies had taken place through empowerment deals, such as the deal with banking group FirstRand.

Although the IFC's $50 million investment in Lonmin stock will give it less than 1%, this deal is an indication that the corporation is set to take a greater punt on South African stocks than previously.

By June, the IFC had R1.9 billion ($256 million) of investments in South Africa. Of that, R1.4 billion ($187 million) was loans to companies such as FirstRand, Standard Bank and Mvelaphanda Gold.

By June, the IFC had shares worth R500 million ($ 66.7 million) in South African companies, including a R51 million ($6.8 million) investment in South Africa Home Loans and R15 million ($2 million)in the Spier Estate Hotel.

This year, the IFC's investment has climbed considerably as it ploughed R220 million ($30 million) into the private equity fund of Ethos, and another R185 million ($25 million) into Brait's private equity fund.