PTM asks Amplats for indicative offer as considers Maseve sale

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Maseve mine

ONE of the strategic options considered by Toronto-listed miner, Platinum Group Metals (PTM), regarding its struggling Maseve platinum mine in South Africa’s Bushveld Complex is to sell the asset.

Market sources told Miningmx that PTM had asked Anglo American Platinum (Amplats) to submit an indicative offer for the mine which was commissioned last year but which has delivered less PGMs than in its ramp-up plan.

The result is that PTM has had to raise additional finance to continue to fund the mine in lieu of sufficient cash flow. The company then said in April that it was in discussions with BMO Capital Markets and Macquarie Capital “… to review and assess corporate and asset level strategic alternatives”.

The company did not respond to an e-mail or telephone message when asked to verify the market speculation. Miningmx has had the speculation confirmed by several sources.

PTM appears to have shifted its attention to its next development asset, the proposed $1bn Waterberg project which an independent pre-feasibility study forecast would produce 744,000 PGM ounces in concentrate at peak production.

The Block 11 section of Maseve, which has been described as critical in Maseve achieving positive cash flow, was not at the 70% to 80% mine ore flow targets having achieved 59.8% in March. PTM did say, however, that the ore flow at Block 11 was trending positively. March production of 2,477 oz 4E in concentrate was its best ever production month at that time.

TROUBLED HISTORY

Maseve, which is about 35km north of Rustenburg in South Africa’s North West province, was designed for output of 250,000 oz 4E. Output was forecast to be 110,000 oz in its first year rising to 180,000 oz, but it has far undershot that ambition.

As early as 2013, Wesizwe Platinum declined to make a further investment in the Maseve mine in which it was a joint venture partner, saying the platinum project “… did not satisfy its investment criteria”.

But it was only last year, as the mine was commissioning, that the pressure began to mount. The company issued shares for a total of $143m, or some R2bn, of which $73m worth was in public offerings during its 2016 financial year. It also amended facilities with shareholders were draw-downs were attached to production targets. It subsequently impaired Maseve for $41.4m in 2016.

Then in January it said it would issue 600,000 shares to Sprott Resource Lending Partnership and Liberty Metals & Mining Holdings in return for waivers on existing loan facilities and extensions of covenants.

“Maseve is unlikely going to make it,” said one banking source in Johannesburg. “Tough geology and most insiders knew this, but they [PTM] went ahead anyway.

“They had another offer from a local player a while back who wanted the company for the Northern Limb resource, but following a due diligence they walked as they considered Maseve too big a poison pill,” he said.

10 COMMENTS

  1. Another step in the continuing decline in mining in SA. The benchmark was set by South Deep – and Maseve is an underperforming mine that cannot reach production targets.

    maybe the brutal reality is that we don’t have the skills nor experience left in SA to start new mines – the miners should look at themselves and moves from 1886 into the 21st century – by all accounts the miners mindset cannot grasp the situation that they are the resistance factor to modernising mining

    The result is that more competent people will work elsewhere – Aus, Africa – anywhere but SA

  2. Jones et al really made a mess of things with this mine. AAPlc will NOT buy this mine even for R1. I advise that it be sold to RBPlats or Implats. There are synergies both this companies can deliver to rescue this potential sweetener to their nearby operations.

    I have read the technical reports of Meseve, Platmin & Bakubung (old Wesizwe) about 3x. I have arrived at the following conclusions :
    My reasons are as follows :

    1. In Geology its “structure,structure & structure” : These projects are geologically structurally challenged and were stillborns from the get-go. Meseve and Bakubung being worst of because of the Pilanesberg Alkaline Complex effects. All the faults namely Chaneng , Rustenburg etc are all post-mineralisation, thus deleterious to the geological structure of the mineralisation. Geologically ,the Meseve orebody is challenged in that it is faulted ( has extensive dykes and faults) and channel widths ( 81 – 230 cm) are not consistent even for Merensky reef which is the current production reef horizon. Hence then targeting the Block 11 , which is indicated as the thickest. But to get to it, they needed more development ( which means more cash). Therefore, a whole 18Mt reserve (2P) mine will depend on a 3Mt block drilled at 130x100m , which is 1km away from current infrastructure all for contained 545Koz 4E, thats 2 yrs production at estimated steady-state rate. I DO NOT BUY IT!

    2. For Meseve & bakubung, lousy project management has led to these mining project being late. For Meseve steady-stage was meant to have been achieved in FY14, yet its FY17 and this mine is nowhere near achieving capacity production of 245Koz 4E.

    3. The Meseve project material logistics/handling were poorly planned and executed as evidenced by new conveyors being installed during ramps etc.To substantiate, each production unit (or level) requires some 14 raises for 140Ktpm, yet for block11 there are currently only 5. It takes some ±20months to put a production unit (with all its ancillaries ), so there is no way 140 ktpm will be achieved soon. Even more worrying, is that this will require more cash. Production Development costs money.

    4.The Meseve project had a payback period of 7 yrs , with 8 yrs of peak capacity production.The ramp-up period was scheduled to last 2 yrs. Now it seems ramp-up will last 4 yrs and given OPEX= ±$800/oz 4E and Current basket price received of ±$600/oz ( Tharisa also receives ± $600/oz as per their Interims), shareholders will be left holding the bag by Liberty and Sprott.

    5. The financing structure for this Meseve mine was ill-advised. The expensive debt is now accumulating on the balance sheet courtesy of Sprott and Liberty. At last count this was 3 yrs facilities at 25%/yr and 19%/yr. So I think they will takeover this mine if design capacity is not achieved by end of 2017. Now BMO has joined the feast as well.

    6. Given the geological and geotechnical challenges, the costs are steadily creaping-up whilst the PGM prices are not favourable. Therefore grade becomes a serious issue. the cut-off grade at current prices given the OPEX, is ±600 cm.g/t. Therefore, Block11 better achieve recovered grade ( at the Mill concentrate) of 4 g/t. This leaves little room for error given the drilling spacing. THE RISKS OF MISSING THE GRADE TARGET ARE JUST OVERWHELMING.

    7. Meseve is a relatively short LoM mine and thus should best be operated during high PGM prices. At current prices trying to run this mine is just a waste of a reserve.

  3. Buy the dream, sell the reality. That’s the story of PTM. Was it not Anglo that sold the mineral rights to PTM originally and then also decided to also exit the WBJV?

      • Thats not entirely correct.

        So there wasn’t extensive drilling to seek geological understanding on the part of Amplats into the area comprising meseve project. The mining rights became available after the promulgation of the MPRDA’s “use it to lose it”.

        In the 1980s, JCI( predecessor to Amplats) had a rule of only developing extensive (>30 yrs) mines NOT less. So even when BRPM was build lately by modern day Amplats, they just ensured that it could sustainably produce >20Moz PGM during its LoM.

        Amplats DID NOT know the orebody well, but knew that near such geological abnormalities there is danger. Lessons that were learned from Union & Amandebult by JCI. Another such lessons is that of Implats pertaining to Eland Mine.

  4. Gold speculator does provide a good technical analysis of PTM’s failing at Maseve.

    It is ironic that this is the second mine started by a Canadian company that cannot get into full production.

    Anyone remember Great Basin Gold’s Burnstone mine ?

    After all it is the Canadian mining industry and their obsession with hyping the stock market ( viz Friedland and Ivanplats etc) – again remember Bre-X and Busang ?

    We will always live with this legacy of the Canadians – the tedious resources codes

  5. Comment:maseve hired an incompetent managers and incompetent company like Redpath thats doesn’t knw hw to mine reef and there knw nothing about board and pillar.maseve have a man and woman dat are willing to take maseve in good standard bt because of those so called manage, I dnt see there gonna make it

  6. As long as there is Poor management who dnt hav mining experience, Maseve will be sitting with the same problem of not archiving what it have to. Furthermore, the hiring of incompetent companies will result in the downfall and the unhappiness of the employees is a burning issue.

  7. Comment: Maseve is actually leaded by blinds
    management and people who just want to put money in their pockets and leave as they did.

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