Shanduka prepares to widen its reach

André Janse van Vuuren | Wed, 18 Jan 2012 18:20

[miningmx] -- NEGATIVE sentiment towards South Africa has kept the valuation of good mining assets in check, says Shanduka Resources, indicating it would be ready to do a deal should a good opportunity present itself.

Managing director Cobus Loots told Miningmx on Tuesday that part of the group’s transformation from being a holdings company to becoming an operator would include the odd “opportunistic” transaction.

“Our strategy is to remain focused on the commodities we understand,” Loots said, referring to coal, platinum and gold. “But we’re also opportunistic; there’s a lot of opportunity in South Africa because of the negativity.

“Most assets carry reasonable valuations; that’s not the case elsewhere.”

Shanduka Resources gained control of Shanduka Coal in December, paying Glencore a combination of R370m in cash, some assets and an undertaking for future funding. Glencore still holds a 49.99% stake.

“The decision to increase our shareholding in Shanduka Coal is in line with our strategy of expanding our investment in the coal sector and becoming more operationally involved,” Shanduka Group CEO Phuti Malabie said at the time. “Glencore brings its marketing experience and track record to the table.”

Loots said forays with Glencore into other commodities were not on the cards at this stage.

In another development during December, the China Investment Corporation (CIC) bought a 25% stake from previous shareholders for R2bn in Shanduka Group, with chairman Cyril Ramaphosa saying the deal would enhance the group’s growth trajectory.

Shanduka Group is the holding company of Shanduka Resources, under which Shanduka Coal resorts.

Loots said China’s particular interest in securing commodities for domestic use probably implies that future cooperation between Shanduka and CIC would be biased towards the resources side, although no discussions over specific ventures have taken place.

Shanduka’s current exposure to gold stems from its 26% shareholding in Pan African Resources, which Loots said has now become “a very strategic asset” due to Pan African’s growing exposure to other precious metals. The company produced its first PGM concentrate at the newly commissioned Phoenix chrome tailings retreatment plant in December, ramping up towards targeted production of 12,000oz of PGM per year.

While no plans are on the cards for Shanduka to increase its stake in Pan African, Loots said the two companies would jointly pursue new opportunities.

“Our strategy will become clearer within the next year or two,” Loots said. “Good relationships are important when you don’t have a controlling share.”

Shanduka is also conducting a feasibility study on a revised mining plan for Lonmin’s Messina Platinum Mines.

Lonmin announced in October that Shanduka could invest R1.1bn to buy 50% plus one share of Messina – an asset that has a long history of failed mining attempts by previous owners, given the complex and steeply dipping nature of the PGM bearing reefs.

Loots said Messina could be a great asset if a workable mining plan is implemented.

“Messina has got great infrastructure. We’re checking if we could make it work using a different approach,” he said.