Impala eyes Wesizwe

Brendan Ryan | Mon, 02 Nov 2009 15:43
[miningmx.com] --A TAKEOVER bid by Impala Platinum (Implats) is believed to be one of the three options being looked at by Wesizwe Platinum (Wesizwe), which is currently trading under a cautionary notice.

When approached for comment, Wesizwe CEO Michael Solomon referred the query to Wesizwe chairman Iraj Abedian. He has not returned calls from Miningmx. Implats CEO David Brown has also not returned calls.

The other two options being considered by Wesizwe in terms of the cautionary issued on October 27 are understood to be some kind of fund raising scheme and a deal to bring in a new partner.

Market speculation is that the partnership deal would mostly likely be with either a Chinese or Japanese firm wanting to secure its source of platinum group metals (PGM), given worries over possible future shortages of supply.

There is keen investor interest in what action Implats might take, not only for the immediate impact on the Wesizwe share price but because of the medium-term implications for possible greater consolidation of that sector of the Bushveld Complex.

Well-placed platinum sector sources are speculating on the role Royal Bafokeng Holdings (RBH) may be about to play, given its strategic links to the two major groups which dominate that particular sector: Implats and Anglo Platinum (AngloPlat).

RBH is the largest shareholder in Implats, with a 13.2% stake. Perception in the platinum sector is that RBH’s influence over Implats has been strengthened through the recent dismissal of its chairman Fred Roux.

Roux has been replaced as chairman by former ArcelorMittal chairman Khotso Mokhele. RBH CEO Niall Carroll suggested Mokhele be appointed as chairman in the email he sent to Roux on October 18, which triggered the reaction by Roux which resulted in his dismissal by the Implats board.

Mokhele is believed to have close links to the Royal Bafokeng.

RBH last year re-negotiated its agreement with AngloPlat over the Bafokeng Rasimone Platinum Mine (BRPM).

In terms of the restructured BPRM joint venture deal, Angloplat will sell its stake in the JV down to an effective 43%. The BRPM mine will be controlled by RBH through a company that will be listed on the JSE and will own 67% of the BRPM JV.

Carroll said last November that the new structure would create an independent, black-controlled PGM producer that would be a platform for the consolidation of “mid-tier regional PGM assets”.

That, platinum sources believe, could be what is about to happen.

The Implats lease area is contiguous with the eastern boundaries of both BRPM and the undeveloped Styldrift property, which is part of the BRPM JV.

The western boundaries of BRPM and Styldrift are contiguous with Wesizwe’s core Frischgewaagd-Ledig properties. These in turn link into what is known as the Western Bushveld JV between AngloPlat and TSX-listed Canadian junior Platinum Group Metals (PTM).

There are minority cross-holdings between PTM and Wesizwe in their respective projects.

It’s worth noting that PTM CEO Michael Jones told Bloomberg news agency last week that the company would make a key decision on its future within a month.

Both PTM and Wesizwe face major hurdles in trying to raise the funds they need to proceed with their respective projects on a stand-alone basis under current grim market conditions.

The underlying reason for the proposed consolidation is that an efficient way to develop this region would be to eventually put it all under Implats ownership, so it can be developed using the group’s 20-shaft infrastructure.

Even if this is accepted in principle by all parties, such a consolidation will not be easy to accomplish.

First off, the Implats board has to be convinced that buying another platinum junior is the right course of action, following the purchase of African Platinum which did not work out as planned.

In a recent interview with Miningmx, Brown laid out the pros and cons. He said: “The problem is that you have to buy the company and then spend the capital expenditure to build the mine on top of the purchase price.

“Many of the juniors out there still do not offer appropriate value from our perspective, because their assets are a mixture of good and not-so-good projects.”

Then, AngloPlat has to be convinced to give up ownership of some of its assets to its greatest rival – Implats - at a time when it is battling to raise its production and needs ownership of metal to sell to its own customers.

The suggestion is that Implats may have to come up with some kind of “quid pro quo” to get AngloPlat on side.

Also, shareholders in the platinum juniors will have to be convinced to sell out at close to rock-bottom for their assets in terms of current share prices.

The writer owns shares in Impala Platinum.