On a relative basis, we believe Royal Bafokeng Platinum represents the most attractive value in the platinum sector. Upon listing, the Royal Bafokeng Nation (RBN) held 57 percent of the company. Rory Kutisker-Jacobson looks at the investment case for RB Plats and gives some insight into how the Bafokeng came to own such a sizeable stake in the business…
History of the Royal Bafokeng Nation
The listing of a platinum company of such magnitude is a rare event in South Africa, but what makes this particular listing unique is the history of the Bafokeng Nation.
In the 1860s, around the time diamond mining started in Kimberley, white farmers began to settle in the Rustenburg valley and register farms in their own names, ignoring the traditional rights of ownership enjoyed by the Bafokeng people for many centuries. Fearing the seizure of Bafokeng land, Kgosi August Mokgatle – then king of the Bafokeng – realised the Bafokeng would need to purchase farms to retain property to which they were, in essence, already entitled. Lacking funds, he ordered the young men of his tribe to make the trek to Kimberley to work in the diamond mines, bringing their savings home to be pooled in a community fund.
Legally prevented from acquiring property in their own name, the Bafokeng then sought the aid of Lutheran missionaries who would hold the title deeds on their behalf. In this manner, the Bafokeng nation began to acquire property as early as 1869, and over the next 30 to 40 years amassed some 900 hectares in the region. Over time the title deeds held by the missionaries were transferred to government to be held in trust for the Bafokeng nation as a collective.
Subsequently in the 1920s geologist Hans Merensky discovered outcrops of the Bushveld Complex in the Rustenburg valley and, as luck would have it, a substantial portion of this ore body lay below land owned by the Bafokeng.
Over the next 70 years there were several attempts to dispossess the Bafokeng of their land. Mines were constructed and the extraction of PGM and other minerals took place. Although the RBN contest that they were not paid sufficient royalties, they were able to retain their legal title and continued to acquire adjoining farms in the region. In the late 1990s, following the abolition of apartheid, the royalty structure was revised and the Bafokeng began to receive royalties of higher value.
Funds generated from the mines have been re-invested in the community and in their investment vehicle, Royal Bafokeng Holdings (RBH). The Bafokeng have used their income to build schools, roads, clinics and other infrastructure in the region while RBH has grown to a company managing some R30-billion in assets.
A great success
Royal Bafokeng Platinum (RB Plats) listed on 8 November 2010 at R60.50 per share, giving it a market value of just under R10-billion. At listing the Royal Bafokeng Nation held 57 percent of RB Plats, Anglo Platinum held 12.7 percent and the remaining 30.3 percent was made available to the public. Our client portfolios collectively own 5.1 percent of RB Plats.
For those interested in the fundamentals of the Platinum Group Metals (PGMs) Industry, I refer you to Quarterly Commentary 3, 2006 (you can find previous issues at www.allangray.co.za/quarterlycommentary, or you can call our Client Service Centre on 0860 000 654). As our opinion has not changed materially, I do not repeat it here.
Given the current debate on nationalisation, and questionable practices in awarding mining licences, one might ask how the Bafokeng came to own such a sizeable stake of the business. For centuries the Bafokeng people have occupied land between Rustenburg and Sun City, most of which lies above what is arguably the most valuable ore body in the world. A geological wonder, the ore body called the Bushveld Igneous Complex contains roughly 80 percent of the world’s known platinum reserves. That below the Bafokeng land lies such a valuable ore body is fortuitous, but how they managed to retain their ownership and rights is not. The Royal Bafokeng Nation is a success all of its own making.
Article continues on page two: why Allan Gray thinks Royal Bafokeng Platinum is the best investment in the platinum sector...