Braemore may have Finnish suitor

Brendan Ryan | Wed, 17 Jun 2009 12:12
[miningmx.com] -- PLATINUM and nickel producer Braemore Resources is in talks which could lead to an offer being made for the company. Market sources reckon the buyer could be Finnish refining group Ruukki.

Braemore CEO Leon Coetzer was not immediately available for comment.

The company said in a statement released on Wednesday in response to “recent volatility in the share price of the company” that it confirmed Braemore was “in discussions with a third party that may or may not lead to an offer being made for the company”.

On London’s AIM market the Braemore share price dropped from about 7 pence in mid-May to about 4.45p before jumping to 5.95p on Tuesday. This earned it a “speeding ticket” from the stock exchange authorities, resulting in Wednesday's cautionary announcement.

Ruukki’s strategy is to focus on “end products with a high degree of refining”. The group announced in 2008 it was looking at potential expansion into southern Africa because “this area holds the largest chrome ore reserves in the world.

"Specialisation in other speciality metals and alloys is also a possibility.”

Ruukki is in the process of buying Mogale Alloys for R2bn and made the first payment of R1.2bn at the end of May.

Mogale produces a range of alloys from its Krugersdorp plant including charge chrome, chromium-nickel alloy and silico-manganese. Mogale’s production is marketed through JSE-listed Metmar, which also owned an effective 11.8% shareholding in Mogale.

Braemore would appear to fit Ruukki’s strategic business requirements because of the revolutionary ConRoast technology it has licensed from SA research institution Mintek for the treatment of platinum group metal (PGM) ores.

The particular attraction of the ConRoast process is that it can treat PGM ores with high concentrations of chrome.

The technology could be strategically vital for the SA platinum industry’s future, which will have to source greater volumes of its production from the chrome-rich UG2 Reef instead of the Merensky Reef it has largely exploited until now.

High chrome levels pose a serious danger in the smelting process and have resulted in a number of furnace failures. The latest of these has just been reported by Lonmin.

Braemore has been successfully running a 3.2MW smelter at Mintek’s Randburg site and is now looking at commissioning an associated hydrometallurgical refining process.

This will separate PGMs from associated base metal byproducts such as copper and nickel to produce a high value PGM concentrate which can be sent for direct processing at PGM refineries.

Braemore also intends building a separate 5MW to 10MW ConRoast smelter, which it hopes to use as a lever to gain greater equity exposure to the platinum sector. So far it has signed up one customer, Jubilee Platinum , to use the technology.

Should Braemore be taken over, it will be the latest development in the ongoing consolidation of the SA platinum sector after Aquarius Platinum’s takeover of Ridge Mining.