Insights

Chinese buyers seek strategic investments in South African Minerals

Fairness opinions

Venmyn Deloitte discusses how it is completing several Fairness Opinions for Chinese investors in mineral projects.

Venmyn Deloitte is completing several Fairness Opinions related to transactions in which Chinese buyers are seeking to purchase South African mineral assets.

The commodities that the Fairness Opinions relate to are precious metals, notably gold and platinum, and the interest in these commodities by Chinese buyers is indicative of the fact that there is a strong Chinese appetite for these minerals. The Chinese investors are either increasing existing stakes to gain control or are buying out all other shareholders to take 100% control.

In some cases the Chinese investors are taking listed companies private, siting impaired fundraising ability in the listed environment as an impediment to developing strategic mineral projects.

Venmyn Deloitte’s involvement, as the writer of Fairness Opinions, is to affirm whether the terms of a merger, acquisition, buyback, spin-off or going private are fair to the minority shareholders. Fairness Opinions usually take the form of a letter describing whether the terms of a transaction are fair to minority shareholders. In some instances, Fairness Opinions are required for transactions that require shareholder approval, particularly those transactions that are conducted between parties that are considered by the JSE Listing Rules to be Related Parties, in which case these transactions are called Related Party Transactions.

Commentators believe that the increasing predominance of Chinese investors in mineral projects is indicative of the changing geo-political environment. Analysts also suggest that Chinese investors, who are generally viewed to have longer-term investment horizons, are increasingly being approached as struggling African mineral companies are being spurned by the traditional investment jurisdictions.

To discuss this issue further, contact Chris de Vries on +27 (0)11 517 4205.

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