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Barplats backer in windfall cash-out
Brendan Ryan
Posted: Thu, 16 Feb 2006

[miningmx.com] -- THE Canadian platinum consortium that funded the purchase of platinum junior Barplats by mining entrepreneur Loucas Pouroulis, has cashed in its chips making five times the original investment in just under two years.

It has sold out to listed Canadian platinum junior Eastern Platinum (Eastplats) for equity and cash equivalent to about R10.90 per Barplats share. This was after buying Barplats from Impala Platinum at R2.10 a share in April 2004.

The move follows a bust-up between the consortium and Pouroulis who was chairman of Barplats but resigned abruptly last October. No reason for Pouroulis' departure was given at the time, but Pouroulis has subsequently referred to a "difference of opinion on management style" between himself and the consortium which consists of Brier Global, Flower Valley Investment, Photon Global and Rivercity Holdings.
You never want to lose good people
Pouroulis has subsequently started development of another platinum mine - Eland Platinum - which adjoins the boundary of Barplats Crocodile River mine near Brits. He took with him three top Barplats executives including the former MD - David Salter and the former finance director - Jonathan Clark.

Development of the Eland Platinum mine was launched on January 18 and the company is to be listed on the JSE Securities Exchange by the end of March. It remains to be seen how the loss of this management team - which has successfully re-started mining operations at Crocodile River despite considerable scepticism over the viability of the mine - will affect Barplats.

The scepticism was because three previous attempts to mine Crocodile River economically failed since the mine was first developed in the late 1980's.

The new MD of Barplats is Wayne Robinson - who was formerly GM of mining at titanium producer Richards Bay Minerals as well as a former MD of Gold Fields' Driefontein mine - while the new finance director is David McAdam who was formerly president of a financial advisory firm based in Houston, Texas.

Said Barplats chairman Allen Palmiere: "You never want to lose good people, but we are very fortunate to have replaced them with extremely good executives." Palmiere said he could shed no light on why Pouroulis quit because he only joined Barplats after the event.

The Canadian consortium owned 210 million shares equivalent to 69% of Barplats. They have sold out to Eastplats for 288.6 million Eastplats shares and C$27.7m in cash.

Eastplats shares closed in Toronto on Tuesday at C$1.39/share which, at an exchange rate of about C$1/R5.30, is worth some R2.1bn plus the cash component of R147m yielding a total of R2.28bn. This is equivalent to about R10.90 per Barplats share purchased.

The deal amounts to a change of control, but Palmiere denied this. An offer to Barplats minority shareholders would not be forthcoming, he said.

"Technically, this is not a change of control. The transaction has taken place offshore and does not affect Barplats shareholders or Barplats black economic empowerment partners,” said Palmiere. “The consortium that previously owned the Barplats shares still hold them via their stakes in Eastplats."

But there is no restriction on what the consortium members may opt to do with their Eastplats shares, Palmiere conceded. It remains to be seen what the JSE authorities will make of this interpretation of the situation.

The two key drivers for the deal are for Barplats to gain access to international equity markets through Eastplats which is listed in Toronto and on London's Alternative Investment Market (AIM) as well as for the synergy between Barplats' Kennedy's Vale property which sits adjacent Eastplats' Spitzkop property on the Eastern Limb of the Bushveld Complex.
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But the problem with developing Kennedy's Vale has always been the depth of the underlying platinum reefs but these reefs outcrop on Spitzkop. Said Palmiere: "Those two properties belong together and we can now access Kennedy's Vale through Spitzkop. There are also management synergies because Eastplats does not have a management team on the ground in South Africa."

As part of the deal, Eastplats is required to complete an equity financing of a "minimum" of C$100m (about R530m) as well as retire or replace a R100m loan which is secured by a pledge of Barplats shares and take over an outstanding convertible loan to Barplats of C$6.9m (about R37m).