This will bring Implats closer to complying with government requirements on empowerment.

The Bafokeng, a 300000-strong community in North West, already earns royalties from Implats subsidiary Impala Platinum, which operates on Bafokeng land near Rustenburg. They have a 1,35% stake in Implats, as well as platinum and chrome interests.

The mining charter requires South African miners to have 15% black ownership by 2009 and 26% by 2014. Compliance is a requirement for mines to convert their old-order mining licences into new-order licences.

In the deal announced yesterday, the Bafokeng will raise finance from external sources to buy a 49% stake in Impala Refining Services (IRS), which refines concentrate for third parties, for R3,4bn.

The stake creates a steady operating cash flow for the Bafokeng, which will be stronger than their Implats’ dividend flow.

The IRS stake will convert into a 7,4% stake in Implats within 10 years. The Bafokeng will nominate another member to Implats’ board of directors, bringing their representation to two, and will nominate three out of the 10 members of the Impala Platinum board, at least one of whom must be a black woman.

Implats and the Bafokeng will each contribute R170m between 2006 and 2016 to a local economic development trust covering the greater Bojanelo community in the towns of Rustenburg, Brits, Koster and Moretele, with a particular focus on women.

With its existing stake and the conversion of the IRS stake, the Bafokeng will have an effective 9% of Implats.

In a separate transaction, Implats will make a capital contribution of R1,8bn to create an employee share ownership programme to enable its lowest-graded employees in SA to have a 3% stake in Implats’ entire business. The 28304 eligible employees will vote the shares immediately and receive the capital appreciation in the shares after 10 years.

Implats CEO Keith Rumble said the deals would bring the empowerment ownership of the company to 26,5%, including credits from the creation of black investment group Incwala Resources, subject to review by the minerals and energy department.

Implats finance director David Brown said Implats would be the first company to reflect the cost of its empowerment transaction as a one-off charge under new accounting regulations. There would be an empowerment compensation charge of R750m, representing the difference between the value accruing to the Bafokeng and the cash value to Implats.

The total charges of the compensation, the development trust and the share ownership programme was equivalent to about 3% of Implats’ market capitalisation. The average cost for other empowerment transactions, excluding the accounting charge, was 3,5% or 3,6% of market capitalisation, he said.

An analyst said empowerment deals always entailed a discount and it was never positive for existing shareholders to be diluted. But the dilution for the Implats transaction was much in line with other empowerment deals.

Royal Bafokeng Resources CEO Chris Molefe said the royalty arrangement was not affected by this transaction. New legislation was in the pipeline which would require mines to pay royalties to government. Implats and the Bafokeng would review their royalty arrangement when there was more clarity on the legislation.