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Wesizwe Platinum CEO Arthur Mashiatshidi

Wesizwe Platinum back on track

Brendan Ryan | Fri, 17 Dec 2010 11:28

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[miningmx.com] -- WESIZWE Platinum shares rose up to 7% in early trading on the JSE on Friday, following an announcement that the takeover deal struck with a Chinese mining and finance consortium in May had been confirmed.

Over the course of 2010, Wesizwe shares slumped from a high of 264c to a low of 142c. This was because of the potential risk posed to the deal by the civil and corporate brawl that erupted among the Bakubung community, Wesizwe’s black economic empowerment (BEE) partner. The share price had started to recover noticeably over the past six weeks.

That dispute led to the postponement of the 2009 annual general meeting (AGM) - which was supposed to be held last December - by a court order, while legal action was taken to resolve ownership of certain blocks of shares as well as the right to vote them.

Wesizwe on Friday published an announcement on the JSE Securities Exchange News Service (Sens) withdrawing the cautionary notice the company had been trading under, because “definitive transaction agreements” had been signed with the Jinchuan group, the China Africa Development Fund and Micawber 809, which is wholly owned by the Wesizwe Empowerment Trust.

FULLY FUNDED

The terms of the deal are largely unchanged, with two exceptions. One is the result of the strengthening of the rand against the dollar over the past eight months, while the Bakubung’s BEE equity position has been improved.

Previously, Jinchuan and the China Africa Development Fund were buying a 51% stake in the business. They are now taking a 45% stake with 6% going to Micawber 809, which has reached an agreement with the two Chinese funders over control of the company.

The quantum of the deal remains the same, with the Chinese partners putting up $227m in equity but now at a subscription price of 186 South African cents per Wesizwe share, instead of the previous nominal price of 207c.

The Chinese consortium will also provide $650m in debt to complete construction of the proposed mine at Wesizwe’s Frischgewaagd-Ledig project west of Rustenburg.

The consortium has also committed itself “to provide any additional funding that may be required in order for operational completion of the project to be achieved, such that the current Wesizwe shareholders will not be called upon to provide further funding or be subject to dilution.”

According to the Sens statement, the transaction “provides a total financing solution of $877m for the development of the project, thereby providing shareholders with an excellent value proposition and a fully-funded project and ensuring there will be no further dilution of equity through the project’s construction phase".

Wesizwe CEO Arthur Mashiatshidi told Miningmx the company hoped to hold its postponed AGM either by the end of January or early in February, following recent developments in the legal processes under way.

He said: “It was unfortunate that the company got drawn into those processes, which involved issues that existed between two shareholders seeking clarity over who owned the shares.

“Under normal circumstances the company would not have been affected by such a dispute. We are now informed that the legal processes have moved ahead such that we should be able to resume our AGM.

“We will call that AGM just as soon as we have official confirmation that this is the situation, after which we would hold the general meeting of shareholders which is required to approve the deal announced with the Chinese consortium.

“I do not believe that any rational shareholder would vote against this transaction.”

Dennis Tucker, MD of corporate advisers Qinisele Resources, said: “All the shareholders have undertaken to support this deal, because it is highly attractive and far less dilutive to existing shareholders than any of the alternative ways of developing the mine.”

Wesizwe’s project is located in a region which has been the subject of considerable market speculation over possible consolidation of the various platinum mines and projects.

The underlying fundamentals for that speculation were confirmed this year in the build-up to the listing on the JSE of Royal Bafokeng Platinum (RB Plat), when Impala Platinum (Implats) bid for RB Plat’s assets only to be vetoed by Anglo Platinum - the joint venture partner in RB Plat’s operations.

In late 2009, Implats had also put an offer on the table specifically for Wesizwe.

Speculation over what could happen next ranges from Implats bidding again for Wesizwe as well as neighbouring Platinum Group Metals to an overall consolidation of the region.

Asked about this, Mashiatshidi said: "Consolidation is good and I can understand the rationale that could lead to it taking place.

“But, as far as Wesizwe is concerned, we are focused on completing this transaction. That will mean we can get on with building our mine which is the prime value creator for shareholders, and also then sit around the table at any discussion on future consolidation as an equal.

“Up until now, I think Wesizwe has been viewed as a stepchild because of the situation in the company.”

The writer owns shares in Wesizwe.



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