PTM still wheeling and dealing

Brendan Ryan | Tue, 08 Feb 2011 10:04

[miningmx.com] -- SOME $4bn in total was now being pumped into the construction of four new platinum mines in a 10 square kilometre area which continues to be the subject of market speculation over possible consolidation.

Interviewed on the sidelines of the Mining Indaba, Platinum Group Metals (PTM) CEO Mike Jones said: "Right now everybody is in construction mode, and the engineers are talking to each other about how to grab synergies.”

The four projects are Impala Platinum’s (Implats') 20 shaft costing about $1bn; Royal Bafokeng Platinum’s (RB Plat's) Styldrift development ($1.6bn); the Wesizwe Platinum/Jinchuan Mining development ($1bn) and PTM’s own development costing about $443m.

The past year has seen the failed bid by Implats to buy the Bafokeng Rasimone mine before it was listed as RB Plat (which was vetoed by Anglo Platinum), and the takeover of Wesizwe by the Chinese consortium headed by Jinchuan.

Asked whether the construction decisions had put to an end to further potential consolidation in the region, Jones said: "Lots of things can still happen. As I have said before - our business plan is open for review every morning.

“This not about philosophy, it’s about money. We are prepared to take the project all the way to becoming a producing mine but, if someone came along and offered the right price, then the company is gone.”

Jones said PTM last year had greatly increased its surface rights ownership in the region, buying the Sundown Hotel and Ranch for C$17m. This extended PTM's ground ownership to the boundary of the Styldrift mine and provided infrastructure which could be used for accommodation, training and local community development.

Jones has previously described PTM’s approach as looking at three strategies - build it, hedge it or sell it.

It’s understood there have been several serious plays to take over PTM, and Jones confirmed that one proposal to “hedge it” - do a platinum metal stream deal along the lines of a “Silver Wheaton” transaction – came very close to finalisation.

According to platinum sector sources, the main reason a deal has not been done is because of they term “unrealistic expectations” by Jones on the value of PTM.

Not surprisingly, that’s flatly rejected by Jones and PTM chief financial officer Frank Hallam.

Jones said: "Our view on value is determined by factors such as the bankable feasibility study we have carried out, and our view on the platinum market which is positive. As long as people want to drive and breathe, they are going to need platinum.

“Our feasibility study was done at a platinum price of $1,343 per ounce so, if Goldman Sachs is correct in its prediction that platinum could reach $2,800/oz by 2014, then maybe we are being too conservative.

“We also think our view on value is more than reasonable if you look at previous deals such as the $1bn that Xstrata paid for Eland Platinum."

Hallam said: "We might have been born at night but it was certainly not last night.”

Asked about the essential infrastructure required for the PTM development, Jones said the project had been allocated the required amounts of water and power for the construction phase.

“We have also been allocated the required power and water needed when we come into production from 2014 and we believe Eskom will be successful in meeting power demands in the country.

“But, in the event that Eskom fails, we are better placed to cope than much of the platinum mining industry. We are at the shallow end of all this activity and can afford to run the mine on diesel power.

“Deeper mines will be far more badly affected because of cost and mine safety issues.”

5 questions with Daphne Mashile-Nkosi: Miningmx spoke to Kalagadi Manganese chair Daphne Mashile-Nkosi at Mining Indaba about the group's key projects.

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