Wesizwe targets cash-producing PGM assets

David McKay | Wed, 08 Feb 2012 17:28

[miningmx.com] – WESIZWE Platinum, the R2.3bn platinum exploration company, said it would consider buying cash-producing or near cash operations in the platinum group metal sector (PGM) in South Africa.

“Currently, Wesizwe is a ‘one-project company’, which is very dangerous – with cash flow only likely to be produced in eight to 10 years time,” said Jianke Gao, CEO of Wesizwe Platinum since August last year.

“We’re looking at a collaboration, synergies or consolidation in the PGM space. We would be looking for a project that was complementary,” he said, adding that joint ventures would also be considered.

Gao, who is employed by Wesizwe Platinum’s controlling shareholder, Jinchuan Group, was speaking on the sidelines of the Investing in African Mining conference.

Jinchuan Group bought a 45% stake in Wesizwe Platinum last year, injecting equity funding worth $207m and providing project funding of $650m, as well as any shortfall funding – a step that would prevent shareholder dilution.

The company is developing the Frisch-Ledig platinum mine, which was initially scoped to produce up to 370,000 oz/year at full production. Development of the mine restarted in earnest last year.

Commenting on Wesizwe Platinum’s flagging share price, Gao said the company was giving thought to accelerating completion of the Frisch-Ledig project forward, but that the main reason the company’s shares had underperformed was a combination of poor industrial demand for platinum, and that new management at the company had avoided the limelight while it was establishing itself.

“After the transaction, there has been a period of silence, especially as I was waiting for a work permit,” Gao said. “We have also been concentrating on the project, working out a realistic strategy for the board, and then getting board approval for our strategy,” he said, adding, “We didn't realise how important communication was.” However, the company could not yet comment on how it would play a role in the long-mooted consolidation in the platinum sector.

The Frisch-Ledig project is situated on the western limb of the bushveld, just below the Pilanesberg National Park, and borders other platinum-bearing properties owned by Impala Platinum, Royal Bafokeng Platinum and Platinum Group Metals. Despite the obvious synergies between the companies, consolidation of any sort has proved elusive.

“While we have been discussing consolidation with our neighbours we don't have a view on how we could be ‘kingmakers’ in the region,” said Gao. Aligning interests in the region was “very complicated”, he added.

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