[miningmx.com] – TORPOR in the platinum group metals (PGM) market has put question marks over the sustainability of Bokoni Mines, the 120,000 oz per year PGM producer owned by Canada’s Atlatsa Resources.
The company announced today that a some C$42.4m (R422m) in financial support from its 49% shareholder Anglo American Platinum (Amplats), intended to tide Bokoni Mines over until 2016 amid a period of capital expenditure, had failed.
This was owing to deteriorating market conditions which has seen the rand price for the basket of PGMs fall to about R11,000 per PGM oz from R12,000/oz in the past month, and down from R13,400/oz – or some 18% – in a year.
“We looked at a potential financial package but a number of issues proved to be too challenging,” said Joel Kesler, commercial director of Atlatsa. “We are considering an alternative package with Amplats and we are also in discussion with the regulator [Department of Mineral Resources] about it,” said Kesler.
He added, however, that time was not on the side of Atlatsa or Amplats. “This will have to be dealt with as a high priority item,” he said.
The cash was to be supplied through the sale by Atlatsa to Amplats’ subsidiary, Rustenburg Platinum Mines of a further 25% in Kwanda North prospecting rights and at least 60% in the Central Block prospecting rights.
However, the transaction had not been completed by the prescribed period of June 30 while an additional condition – the purchase by Atlatsa executives of some C$6m (R60m) in company shares – could also not be completed owing to the low price of shares in Atlatsa and potential dilution of the subscription.
Shares in Atlatsa have fallen 39% in three months, although the stock was 7% higher today. Asked why the share price had gained, Kesler said: “I have no idea about that”.
The failure of the package was not related to the future direction of Rustenburg Platinum Mines, said Kesler. Amplats has announced its intention to say by mid-year if it will sell or list its Rustenburg and Union section mines.
Atlatsa Resources is viewed as a company that cannot be allowed to fail as it comprises an important element of Amplats’ black economic empowerment (BEE) credentials.
The stakes on Atlatsa’s future have also been raised after the DMR said it would challenge in court the Chamber of Mines’ contention that past empowerment deals ought to be recognised by the government even if they no longer existed.
The new financial package would be in addition to the refinancing package Atlatsa Resources negotiated last year in which it sold mineral rights back to Amplats for $171m, cut debt 75% to $150m and reduced the interest bill on the outstanding debt.
“The additional funds would be used for the company’s capital projects and to run the Bokoni mine,” said Kesler in November last year commenting on the latest package.
Atlatsa is currently spending up to C$100m in doubling the production of Bokoni to 240,000 oz/year in lower cost platinum production, due by 2019.
Amplats announced in July 2014 that it wanted to sell its shares in Atlatsa Resources because it “was not the best partner”.
Atlatsa said it “… continued to engage” with Amplats and the Department of Mineral Resources regarding Amplats’ announcement on its potential exit from the Bokoni joint venture.
