Junior gambits light up JSE

David McKay | Tue, 04 Jul 2006 09:00

[miningmx.com] -- SOMEBODY once said that the JSE was no place for exploration companies, a comment fulfilled by the poor track record of junior miners in South Africa. However, the strength of the commodity market is finally making its mark as South Africa’s exploration sector shows signs of stirring. On the JSE there’s been a minor flowering.

Of the 10 new mining listings since the beginning of 2005 – itself a 20% increase to the JSE’s extractive industries listings – about seven could be described as exploration plays. It’s not quite the Toronto Stock Exchange (TSX), but for South Africa there are the beginnings of an exploration boom under way.

Miranda Mineral Holdings, TEAL Exploration & Mining, Wesizwe Platinum and Wits Gold are strictly exploration. Aflease Gold and sxr Uranium One are converting resources into reserves; while Tawana Diamonds is searching for gems in South Africa. Chrometco, listed on the AltX, is another.

Then there are the mining reinventions, such as Simmer & Jack Mines, Barplats and DiamondCore, that have added more activity to the sector. And then there’s a new fleet of listings on their way, including Exxaro, the remodelled coal and base metals firm created from the unbundling of Kumba Resources, the rump of which will become Kumba Iron Ore.

There are also plans to list Petrex Mines following an empowerment deal with Pamodzi. Great Basin Gold, an exploration firm, is also considering listing. “Let’s take the excuses off the table,” said Noah Greenhill, responsible for new business development at the JSE. “A good percentage of newly listed mining firms in South Africa have been able to raise money. Just look at Eland Platinum.”

Listed in March, Eland Platinum raised about R500m for its aggressive exploration and mining programme. It will seek more funding within a year and hopes to be producing by the end-2007.

Greenhill said there were now signs that South African-based exploration companies listed on the Alternative Investment Market in Britain and the TSX are considering dual listings.

Click image to enlarge

“The key value drive is empowerment,” said Greenhill. That’s why the JSE is working on easing the listing requirements for secondary inward listings that have empowerment in mind. “It’s an internal issue at the moment – but we’re aggressively discussing it,” he said.

International miners are also drawn by the possibility of a new shareholder base – however small. But not all are tempted. Ridge Mining, which was widely expected to complete a secondary inward listing this year, looks unlikely to take that route, said CEO Terence Wilkinson. Though African Platinum’s Roy Pitchford has expressed an interest in a JSE listing that’s yet to materialise.

Mike Solomon, CEO of Wesizwe Platinum, endured probably one of the worst debuts when his firm listed in December 2005. The share didn’t carry price guidelines from the JSE on its opening. After seven minutes of zero trade, 2,000 shares were offered at R6/share and bought. The stock ended the day at R4/share and subsequently lost another 50%, whereafter it “found its feet,” Solomon said. Solomon conceded the opening trade “haunts me to this day”. However, it wasn’t the company’s opening valuation or the value imputed to it by its advisers. At first blush Wesizwe must have looked like a South African exploration junior of old: over-hyped and destined for disaster.

Having since embarked on a conservatively scheduled exploration programme there are thoughts to increasing the tempo, given the success of Eland Platinum. Said Solomon: “There’s no doubt proximity to production increases excitement, so we’re going to step up our exploration and have the bankable feasibility project finalised for 2007.”

Commenting on life as an exploration stock, Solomon reckoned institutions could show more interest. “There’s not the level of interest you’d see in Canada or Britain, but it’s good enough.” He earlier thought that Wesizwe might seek a listing in Britain, but that’s now unlikely. The company, in need of a further R200m, expects enough support will flow from South Africa. A new share issue – not exceeding 15% of share capital – is likely.

There’s been some shrinkage on the JSE is other respects. Messina Platinum disappeared off the board following the takeover of parent Southern Platinum by Lonmin.

Barplats is another expected to take its exeunt amid a change of control by Eastern Platinum, a Toronto-listed firm. There will also be doubts concerning the longevity of both Randgold & Exploration and JCI, companies currently suspended amid a year-long forensic investigation into the accounts of both companies.