[miningmx.com] — PLATFIELDS may be raking around its shareholder register to learn exactly how a listing share price of R1.40/share became only 17 cents in less than a month, but the answer may have its roots in over-the-counter (OTC) activity way before Platfields went public.
Quite frequently, unlisted shares are sold privately on promises of untold riches when the listing occurs. What normally happens in such cases is that there’s an exodus of the original shareholder base leaving the poor unfortunates, those who bought the listed share, high and dry.
The cold comfort for these guys is having learned the first lesson in investing: caveat emptor, or ‘let the buyer beware’. The phrase has its roots in Old English law but the lesson is not as entrenched.
Several years ago, the JSE took action against the official (if it can be called that) OTC market claiming that if brokerages wanted to trade through the JSE, then they ought to stop supporting this other fringe market. Anti-competitive gripes aside, most brokers did that; yet a twilight market continues in unlisted shares, quite often among the mining sector. Wealth4U had significant OTC activity before listing. There are others.
In the case of Platfields’ listing, there appears to have been quite an active OTC market years before its listing; in fact, the company’s first private placement was to prospective investors in 2003.
Bongani Mbindwane, Platfields CEO, says although the company never placed a share itself directly on the OTC market, as much as 40% of its 3,000 strong shareholder base were private shareholders first who probably traded among themselves, or to new shareholders.
It’s an interesting sidelight that one of the motivations for such a significant OTC market in Platfields, according to Mbindwane, was to meet Mining Charter recommendations for a broad shareholder base. In the case of Platfields, there were four private placements, the last occurring in 2008.
Quite why shareholders would be bailing out now is mysterious because, as Mbindwane is on record as saying, OTC trade in Platfields was as high as R3.40/share. He doesn’t accept that shareholders are simply cutting their losses.
Says Mbindwane: “It looks like there’s a few unsophisticated investors who have engaged in reckless trading. But the quality of buyer is highly skilled, sophisticated and they know how to value mining prospects.’ He’s hinting at the introduction of a new shareholder now: the professional or institutional.
Prior to listing, Platfields only institutional shareholder was BAC Mining Regions which held 5% of the stock at listing. Mbindwane maintains BAC, a Swiss-based shareholder operating through funds of which some are located in Luxembourg, continues to be supportive of Platfields. In fact, BAC only has to sell Platfields should the share reach R2.05/share since that would trigger Platfields comprised 10% of the total fund by value. (Right now, there’s no danger of that happening).
And of the new buyers for the share Mbindwane says are coming through. There’s a possibility South African funds could number among them, although Mbindwane won’t confirm that at this stage.
JUNIOR MINING
The difficulties of the Platfields share triggered comments at the foot of an earlier Miningmx article that South Africa had once again shown itself incapable of supporting a junior mining market.
I’m not sure that’s the case depending, of course, what you mean by junior mining. If it’s exploration, there’s a raft of prospects on the boards including Platmin, Wesizwe Platinum and even Anooraq Resources if you include its blue sky possibilities. And what about Bernard Swanepoel’s platinum prospect, once known as Lesego Platinum, or Bauba Platinum? Nor is the junior mining activity restricted to platinum.
The country’s coal sector is in liftoff mode. Having recently edited this year’s edition of Rainmakers & Potstirrers, Miningmx’s almanac and personality finder for this year’s southern African mining sector, there’s six executives with the express intention of building a coal mine or expanding an existing one including the likes of Tim Tebeila of Sesoko Resources, Mike Teke of Optimum Coal Holdings, Paul Jury of Resource Generation, and of course Paul Miller of Keaton Energy.
Just because there’s a blowout in the junior mining sector doesn’t somehow blot out the validity of its existence. Rather, it’s in the nature of junior and exploration mining to suffer the occasional mishap.
Don’t tell Mbindwane this. He’s determined Platfields will make a valiant comeback. “The share price reflects absolutely nothing of the fundamental value in our business,” he says. “We’re not having title fights. The only dispute is with Anglo Platinum and we’re in arbitration about that. We will go on.”
