[miningmx.com] – SHARES in Wesizwe Platinum nearly doubled last year, briefly hovering at 94 cents/share, an uptick in investment support the company’s chief operating officer, Paul Smith, put down to some major shareholders believing the company’s troubles were over.
The stock has settled back to around 78c/share, but this still represents a near-70% return on a 12-month basis, according to Bloomberg News data. In terms of market value, this is equal to R1.3bn.
Smith, appointed in January 2012 after a period at Aquarius Platinum as its new business manager, acknowledges the company carried a lot of baggage which included difficulties with the Bakubung community on whose property it is building the R10.7bn Bakubung Platinum Mine (BPM).
There was an attempted board coup, which was defeated, followed by an uncertain time when the likelihood of building the company’s platinum mine in the North West province, seemed remote owing to funding shortfalls. Eventually, the Chinese took control.
The takeover by China’s Jinchuan Group, which bought 45% of the company and helped introduce some finance – $650m was provided by the China Development Bank – has steadied the ship, but Smith acknowledges that language and culture changes at Wesizwe brought its own challenges.
“Board meetings are in both languages [Mandarin and English] so they are long,’ says Smith who attends them as an invitee. Decisions take time as there are structures and time differences to observe. By and large, however, Wesizwe is a company moving forward again.
Last year, it controversially expressed a no-confidence vote in a joint venture with a neighbouring project owned by Toronto’s Platinum Group Metals (PTM) saying the enterprise, known as Maseve, fell below its own investment levels. Smith won’t say on what criteria, or by how much.
The fact is, however, conditions in the platinum market have changed. The depressed metal prices won’t affect Wesizwe Platinum right now, owing to the fact that first production from BPM won’t be until 2019 at the earliest, but the cost of building a project today is expensive.
As a result, Smith completed an optimisation study on the mine – it had already been started by Jinchuan – and found that some 11% of the capex could be cut compared to the bankable feasibility study completed in 2009. There is still a real increase in costs while the $650m from China Development Bank does not fully-fund BPM.
One turns naturally then to the possibility that Wesizwe Platinum’s remaining shares in Maseve could be liquidated to plug some of the funding shortfall. “We are fully aware of the situation and we’re keeping our options open,’ says Smith.
Quite how much Wesizwe Platinum can earn from Maseve is questionable. Wesizwe declined to follow its rights in the project and was therefore diluted, but it and PTM differ on the extent of the dilution. Wesziwe thinks its stake fell 3.5 percentage points whereas PTM thinks it is 5 percentage points.
Either way, it’s unlikely Wesizwe Platinum will look to issue its own shares to plug the funding deficit. Despite the improvement in the share price, there’s a belief Wesizwe still remains undervalued; in fact, at one point Wesizwe Platinum’s stake in Maseve was worth more than its share price.
There are one or two other roadblocks as well.
Wesizwe Platinum is 16% empowered of which a part is related to the Bakubung community’s stake the shares of which can’t be found in events surrounding the board coup of 2010. “There will be a debate about this,’ says Smith – and soon.
That’s because the Department of Mineral Resources is conducting an empowerment audit which it hopes will be completed by December with compliant companies demonstrating 26% empowerment.
