Wesizwe's fate on hold

Allan Seccombe | Mon, 19 Oct 2009 14:09
[miningmx.com] -- WESIZWE Platinum is awaiting ministerial approval for the transfer of the remaining tranches of mineral rights in a deal with its neighbour PTM and Anglo Platinum so that it can map out its strategy to become a platinum producer and decide on its chief executive’s future with the company.

Wesizwe is in the final stages of a transaction with TSX-listed Platinum Group Metals (PTM), which owns mineral rights adjacent of Wesizwe’s project on the Western Limb of the Bushveld Complex, and Anglo Platinum.

Wesizwe is awaiting the conclusion of what it calls Project Delta, which is redrawing boundaries around the respective projects in a massively complex deal, which needs reams of documents for each of the many farms or portions of land involved.

Wesizwe will own 100% of its Frischgewaagd project, bring Anglo Platinum as a 26% shareholder into the company and give the junior company a 26% stake in two projects owned by PTM.

The parties are now awaiting the remaining tranches of Section 11 approvals of the title transfers to finalise the transaction. The majority of approvals have been received. PTM has told the market that formal registration of these new titles will take some months to administer and complete.

“In the mean time, there’s not a lot we can do. We can’t conclude any financing arrangement or mergers and aquisitions until those are in,” Wesizwe CEO Mike Solomon told Miningmx.

He was unable to give a time line on when this could be finalised. Wesizwe has put the building of a mine and concentrator on hold until it has a clear line of sight on the full funding of the project, which is around R6bn.

Wesizwe has concluded – and revised – a bankable feasibility study into the project, but it was hit by last year’s downturn in global financial markets, which are now risk averse and are charging high interest rates or putting in place tough conditions, which has made the company reluctant at this stage to raise capital under those conditions.

Not only will the strategic direction of Wesizwe and the funding be decided once Project Delta is concluded but who will lead the company in its next phase.

Concerns have been raised inside and outside the company about Solomon’s health, which appears to have been hammered by the years of stress in trying to raise capital, forging a path through tortuous bureaucracy and preparing to build a 980-metre deep mine capable of producing 350,000 oz a year of platinum group metals.

The first warning bell went off when he fell ill during a visit to London late last year and two more times subsequently, with each period for recovery becoming longer, the latest spell taking more than a month. He may well be showing signs of burnout.

MY HEALTH IS NOT AN ISSUE

“My health is not an issue,” said a drawn and tired-looking Solomon. “I’m not incapacitated. I’m just tired. I’ve been at this for five years.”

There are worries about the future of the company if Solomon leaves, he being so central to the message Wesizwe has put into the market. He is regarded as the public face of Wesizwe, with no other directors as readily identifiable as he is.

“I think he is the central kingpin in that organisation. If you take Mike out of there a lot of shareholders will bolt because they’re buying it on his good credentials,” said RBC Capital Markets analyst Leon Esterhuizen.

“Being Mike, if he was in any bad medical state, I would expect him to quickly make some arrangements to get someone good in there to replace him. He does his planning to a ‘T’,” he said.

It would be expected that if Solomon were suffering from something serious that the company would make an announcement to the market, but there has been no communication of the sort, which is positive.

Solomon has a year left in his contract left with Wesizwe and in that time strategic decisions on the future of the company will be made, including who will lead it.

“I can’t put in place succession planning until we’ve settled the strategic model. At that time we will see what is needed to take the company forward into its next phase,” he said, having overseen the company from start up to exploration to the end of a bankable study and to the cusp of development.

“Going from exploration and development to building a mine is a massive step and we’ll have to decide who we bring on board then,” he said.

“Whatever decision is taken – if we raise capital to build a mine or bring in a strategic partner – that decision will be based on what will generate the best value for our shareholders,” he said.

“The company will have to change to meet its new strategic imperatives. The life and health of its CEO is not the life and health of Wesizwe,” he said, arguing the company and project, with a life of more than 30 years, are bigger than just one person.

There is increasing speculation that Wesizwe could be a takeover target sooner rather than later, with its market capitalisation below the net asset value of its assets. Wesizwe was never set up to be ramped up the value chain and then sold, with Solomon repeatedly telling the market the intention was to build and operate a mine and then look for growth.

Companies, large and small, with operating assets and cash flow are at a distinct advantage over their peers, who cannot raise capital to develop assets, in a widely anticipated consolidation of the South African platinum sector.