| |
Xstrata offers $1bn for Eland Platinum
Allan Seccombe
Posted: Tue, 07 Aug 2007
[miningmx.com] -- XSTRATA Alloys is making a $1bn or R7.25bn cash bid for Eland Platinum.
Xstrata Alloys, which will fund the transaction from the Xstrata Group's cash holdings, has irrevocable support from 51% of shareholders, including the directors of Eland.
“Xstrata’s offer for Eland marks the fulfilment of our next step in our strategy to further our position in the platinum group metals sector, building on the foothold established through our interest in the Mototolo Joint Venture (with Anglo Platinum)," said Peet Nienaber, CEO of Xstrata Alloys.
The offer of R105 per share is at an 18% premium to Eland's closing share price on 11 April and a 14% higher than the volume weighted average price over the last 30 days of trading.
The transaction should be finalised by mid to late November and the main thrust for Eland up to then would be to deliver an
operational mine to Xstrata, said MD David Salter.
The plans Eland had to double production at the mine to 560,000 platinum group metal ounces over the next three years will be revisited with Xstrata to find ways to bring that forward, he told Miningmx. Eland was constrained by limited cash in its plans, but Xstrata is bringing with it far greater financial firepower.
Eland also planned to raise output to one million ounces by 2015.
"All these plans will be re-validated and I imagine there would be acceleration across all fronts including exploration of the additional properties we bought," Salter said.
Bernard Loriol, a partner of Best Asset Class, a Swiss-based mining fund with 3.2 million Eland shares, said the transaction was good for the South African platinum sector, which has experienced a big pull back over the past two weeks, and showed acquisitions of juniors were becoming more expensive.
"This is just perfect timing by
Xstrata and this transaction will bring confidence in the sector back to the market," Loriol said. "I agree with this transaction and I think it's a very good price."
Loriol estimated Xstrata was spending $20 per ounce in the ground, setting a new high water mark for takeovers in the sector. The Impala takeover of African Platinum earlier this year was at $8/oz in the ground and Lonmin's acquisition of AfriOre soon thereafter was for $16/oz.
"The entire sector should benefit from this corporate action, especially explorers and juniors," he said.
However, Heye Daun, a fund manager for Old Mutual Investment Group, said the price offered by Xstrata did not reflect the upside in Eland Platinum's price.
"We are obviously pleased that someone other than the retail market has put a price on Eland. That Xstrata is willing to pay this expresses huge confidence in the orebody and the work Eland management has done," said Daun in an interview.
"Having said that, the offer does not reflect the true upside in the company," he said. Daun said that Xstrata's R105/share offer does not allow for even half of the 1 million oz/year target Eland Platinum has planned.
"We could hold out in order to join other shareholders in pushing for a higher price from Xstrataby preventing them from achieving 75%, but as fund managers
we have other factors to consider, such as fund flows and sector rotation, which would be reasons to accept the offer," he said.
An analyst who declined to be named said it's interesting Xstrata did not bid for Lonmin instead, the share price of which has weakened about 28% in just under a month. "By bidding for Eland Platinum Holdings, Xstrata can keep its powder dry for a longer term, friendly deal with Anglo American," he said. Anglo American owns about 75% of Anglo Platinum, the world's largest platinum producer.
"No doubt Xstrata will sell the scaleability issue to the London market. But it has much bigger ambitions than that," he said.
Eland will begin producing concentrate from its first phase opencast mine at Elandsfontein on the southern portion of the Western Limb of the Bushveld Igneous Complex in October this year.
The Elandsfontein project has an estimated 22.7 million ounces of platinum group metals and gold. The project will move
to underground mining development in December. The underground mine will phase out the opencast mining and keep the mine at a steady state production of 280,000 oz of platinum group metals.
"The mine and infrastructure is further designed to double existing production capacity, which Xstrata plans to accelerate," Nienaber said.
"We believe that Eland’s production of concentrate in the very near term and strong growth pipeline provide an ideal platform from which to grow a world class PGM business," he said.
Salter said the offer was good for the company's shareholders.
“We believe the cash offer represents the culmination of Eland management’s continued promise to deliver exceptional value to shareholders, and once the Scheme is approved by shareholders, a very attractive opportunity for them to realise substantial growth in their investment over a very short period of time," he said in a statement.
| |
