The potential R21 billion merger between Impala Platinum, Northam Platinum and Mvelaphanda Resources has collapsed, it was confirmed yesterday (14th January).

Impala, the world's second-largest producer of the precious metal, had been in talks with the two firms for most of last year after expressing its desire to create a "South African platinum champion."

However, the deal - which would have seen Impala shares issued in return for those of Northam and majority stakeholder Mvelaphanda on different exchange ratios - has been cancelled after price negotiations stalled.

A joint statement read: "Due to the current global economic climate, as well as the ongoing volatility in commodity and equity prices, the parties have not been able to agree on exchange ratios for the implementation of the proposed transaction.

"Negotiations have therefore been terminated."

As the news filtered through to the markets yesterday, Northam's share price plummeted by over 27 per cent, while five per cent was slashed off the value of Impala.

Despite the announcement, Northam has confirmed that it intends to press ahead with its Booysendal project, which was arguably the main motivation behind the Impala approach.

Booysendal offers 103 million pgm ounces of cheap prospect at shallow, quick-to-access depths, in comparison to Impala's current deep-level exploration projects in South Africa and risky ones in Zimbabwe.

Northam CEO Glyn Lewis told Miningmx.com: "We are certainly not pulling the plug on Booysendal. It's not only our future but a chance to expand production with cheaper ounces."

According to reports, the deal faltered after Impala changed its original offer of 35 of its shares for every 100 in Northam to 25, citing depressed pgm market conditions.

Mvela Investor Relations Head James Wellsted revealed that he knew Impala would be unable to produce a suitable offer after it refused to provide details of its future capital expenditure plans and production profiles.

"We have an idea of the value of Mvela, Northam and Booysendal, and Impala knew where we were coming from," he told the news provider.

"They felt the offer they could make would not be accepted by us."

Impala CEO David Brown confirmed that he was "disappointed" at the outcome, particularly as he believed that there was a "strategic rationale for the deal", according to the Financial Times.

He also expressed his concerns about a "tough" 2009, a view shared by Northam and Mvela, who also noted in their statement that the longer-term outlook for the pgm industry is still positive.

"Although the near-term outlook for the platinum sector remains challenging, the parties continue to believe in the long-term fundamentals of the industry," they said.

Sources:

Northam Platinum forges ahead on Booysendal (14/01/09)
http://www.miningmx.com/platinum/920088.htm

Northam's shares plunge on profit warning, Implats deal (14/01/09)
http://www.miningweekly.com/article.php?a_id=150688

Volatility sinks platinum merger (15/01/08)
http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A918798

South African platinum merger collapses (14/01/09)
http://www.ft.com/cms/s/0/9b18c05a-e229-11dd-b1dd-0000779fd2ac.html