SUSTAINABLE DEVELOPMENT How HDI structured the deal that created South Africa’s first Black Empowerment Company to trade in North America

This past spring, when South Africa finally passed new legislation compelling its mining companies to either mine t...
This past spring, when South Africa finally passed new legislation compelling its mining companies to either mine their properties at optimal production levels or cede all rights to them back to the government, a wave of foreign companies appeared seeking to acquire these rights and the potentially lucrative opportunities they represented. The new legislation, however, also included a Black Economic Empowerment (BEE) Charter, requiring all mining companies to award historically disadvantaged South Africans (HDSAs) an immediate 16% equity ownership in these properties and a 26% stake within 10 years.

Vancouver-based mineral exploration company HUNTER DICKINSON INC. (HDI) decided these opportunities were too exciting to miss and formed an AMEX- and TSXV-traded subsidiary, ANOORAQ RESOURCES, to investigate acquiring and advancing platinum group metals prospects in one of the world's richest PGM sectors, namely the northern limb of South Africa's Bushveld Complex.

First, seeking a partner with an established South African base, Anooraq in 2002 formed a co-development agreement with the world's leading PGM exploration company, ANGLO PLATINUM. Independently, Anglo had been developing a PGM project called Twickenham, and in accordance with BEE laws had awarded a BEE consortium called PELAWAN INVESTMENTS the required 26% interest in the property. (This interest subsequently converted into a 50% ownership in the section of Twickenham known as Ga-Phasha). Soon, exploration and initial development began, yielding an incredible prognosis: Ga-Phasha would likely yield a staggering 20 million oz of PGMs in a measured and indicated category, with inferred resources of an additional 40-45 million oz.

Then, unfortunately, the roof fell in. The funding sought by Pelawan to continue development of Ga-Phasha failed to materialize placing the future of the project in severe jeopardy.

Enter HDI in January 2004 with an ingenious plan: a reverse takeover of Anooraq by Pelawan, converting Anooraq into a fully compliant, well-funded BEE company.

Here's how HDI structured the deal: Anooraq issued Pelawan 92 million shares 63% ownership in Anooraq - in return for 100% of Pelawan's interest in Ga-Phasha. All but 4 million of these shares, however, were locked up in a trust for the lesser of either one year after commencement of commercial production or six years from the date the deal was signed, after which Pelawan beneficiaries could only sell the shares to HDSAs thus guaranteeing a long-term commitment toward establishing a thriving Black-controlled and Black-owned mining company.

HDI also established a progressive plan to ensure that the new Anooraq grew securely. Temporarily, the company's CEO, CFO and leading technical positions were held by HDI appointees, but each and every HDI appointee was understudied by a Pelawan appointee who would take over the position as soon as he or she acquired the required knowledge and expertise. The Anooraq board was divided equally between HDI, Pelawan and independent members thus satisfying North American exchange and regulatory requirements.

The final result is promising Anooraq is now a thriving BEE company, the first BEE company listed offshore, traded on the AMEX and TSX Venture exchanges, and has direct access to financing opportunities on North American and European markets. Together with its 50% partner Anglo Platinum, Anooraq is today an increasingly vital force in platinum exploration in South Africa and a prime example of how North American and South African business know-how and capital can be combined to form a mineral exploration enterprise providing expanded opportunities to individuals across the racial and economic spectrums.

Ahvi Spindell works for Eisenberg Communications and can be reached at 212-580-4567, or


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