[miningmx.com] – South Africa’s platinum industry may have to restructure substantially to survive the current low platinum group metals (pgm) price environment according to JP Morgan Cazenove which has dropped its platinum price forecasts and pushed out a recovery to the second half of 2016.
According to analysts Allan Cooke and Abhishek Tiwari, “restructuring is the name of the platinum game now’ with Anglo American Platinum (Amplats), Impala Platinum (Implats) and Lonmin all in the process of rationalising or right-sizing their assets.
In a comprehensive “Platinum Foresight’ research report published recently the analysts say Amplats is the best placed to succeed because “it is the only miner that has options to mechanise the bulk of its production by 2020′.
They add that the ownership of various, as yet undeveloped, platinum projects could change hands through possible new combinations of ground as the platinum miners trade assets to achieve better synergies for their future operations.
Looking long-term the JP Morgan analysts remain confident on the future of the platinum market stating, “it remains a question of “when’ and not “if’ platinum prices will reflect the difficult economics of SA mine supply, in our view. More than half of SA’s (platinum) mines are burning cash after capex now.’
One of the platinum operations singled out by the analysts in their report is the Pandora Joint Venture situated between Marikana and Rustenburg. Pandora is owned 50% by Lonmin and 42.5% by Amplats which has indicated it wants to sell out because it views Pandora as “non core’.
Lonmin has a right of first refusal over Amplats’ stake as well as the right to match any existing bid for the asset but Lonmin CEO Ben Magara was giving little way when quizzed earlier this week at a presentation of the group’s interim results.
He told Miningmx, “Pandora is an asset we operate and we realise its value and accretive nature to Lonmin’. Magara declined to comment on what may be under negotiation with Amplats.
According to the JP Morgan analysts “it would make sense’ for Lonmin to buy Amplats’ stake in Pandora because it would increase production and also open up the possibility of taking over Implats’ Leeuwkop property which is a down-dip extension of Lonmin’s Pandora and Marikana mines.
But they point out Lonmin is “cash constrained ……it is difficult for us to see Lonmin using its scarce cash for an asset purchase soon. There might be other significant opportunities to exchange assets and increase value efficiently for Lonmin, in our view.’
Specifically, the JP Morgan analysts reckon Lonmin would be better off selling its underground Akanani property on the Northern Limb of the Bushveld Complex to Amplats which could get at it using a decline shaft from the bottom of its adjacent, opencast Mogalakwena mine.
They pose the question; “were Lonmin to sell its Akanani property to Amplats, could the proceeds potentially be reinvested in buying Leeuwkop from Impala and/or Amplats’ 50% stake in Pandora, perhaps?
“We think such a tripartite transaction would unlock significant value for shareholders – a win-win-win deal, if you like’.
