Bernard Swanepoel's first platinum play

Allan Seccombe | Fri, 29 Jan 2010 16:43
[miningmx.com] -- CASH shell Village Main Reef Gold Mining Company is proposing a massive share issue to fund a R411.5m purchase of a controlling stake in Lesego Platinum, which is about to embark on a bankable feasibility study into its platinum prospect.

The Phosiri platinum project lies sandwiched between Lonmin's Limpopo mine, which that company has suspended, and Anooraq's Bokoni mine, the former Lebowa mine operated by Anglo Platinum.

The project has come up for a deal of scepticism because of its depth. The reef lies two kilometres below the surface, abutting the Phosiri Dome, an instrusion that broke up the northern tip of the Eastern Limb of the Bushveld Igneous Complex.

Phiway Mbuyazi, the CEO of Lesego, has defended the project, arguing that gold mines in South Africa are operating at that depth and more. He has also argued that the grade of the project should compensate for the depth.

Village director Bernard Swanepoel made a similar argument, saying the width of the Merensky and UG2 ore bodies and the grade made this a very "mineable" project. He expected the deal to be concluded by May or July at the latest.

The two kilometre depth is a cutoff and the bulk of the ore body lies between 1.1km and 1.5km below surface, he said.

Village drew comfort from the investment the R142m investment the Industrial Development Corporation has made in the project and the amount of geological work Lesego has done. It is also happy with paying $3 per resource ounce, he said. Phosiri has a total inferred resource of nearly 28 million oz of three platinum group metals at a grade of 6.43 grams/tonne of those metals plus gold. Lesego has been working on the project since 2005.

Village will own an attributable resource of 17.5 million oz, or 63% of the project. Village is in talks with other owners of farms comprising the project and hopes to secure a total attributable share of 21 million oz.

The purchase of the controlling interest in Lesego and some affiliated parties will be settled by the issue of 205.74 million Village shaers at a share price of 200 cents.

The shares have been trading flat at around 90 cents each but this announcement prompted a single transaction that drove the share price up to 120 cents. Village currently has six million shares in issue.

Village is 47.8% held by To The Point Growth Specialists Investments, which is a company headed by former Harmony Gold CEO Swanepoel, who is no stranger to deep-level mining.

South Africa's Industrial Development Corporation (IDC) has bought a 28% stake in Lesego for R142m. This funding will be used to pay for a bankable feasibility study into the project starting in February and ending in 2012. Village does not expect to raise more capital for this study, Swanepoel said in his capacity as a Village director.

"This is our first deal and it serves as a platform to acquire further precious metal mining opportunities, particularly those with imminent or existing cash flow generation," he said.

"Taking a company from being a shelf company to a proper mining company is normally done in baby steps. This is hardly a baby step," he told Miningmx.

Lesego's management team, including chairman Roy Pitchford, a veteran of the southern Africa platinum sector, and Mbuyazi will join Village. Pitchford could be asked to become chairman ofr Village, he said.

In terms of the binding agreement the parties have reached, Village will acquire the indirect interests in Lesego of Umbono Capital Partners, Minex Projects and Nebavest 69 in exchange for shares in Village. Village shareholders need to approve the transaction, something Swanepoel said shouldn't be a problem.