[miningmx.com] — THE driving motivation behind the cautionary notice issued on Friday by Anooraq Resources (Anooraq) appears to be to get rid of the R2.5bn debt burden which is throttling the platinum junior.
Market speculation is that Anooraq may sell some of the platinum resources acquired from Anglo Platinum (AngloPlat) back to AngloPlat in order to remove the debt.
All of Anooraq’s debt is now held by AngloPlat, following the acquisition by AngloPlat of the R671m in loans that Anooraq previously owed to Standard Chartered and Rand Merchant Bank.
The specific suggestion in the market is that Anooraq may sell “platinum ounces in the ground’ from the undeveloped Ga-Phasha project which it controls back to AngloPlat, the minority shareholder in the joint venture.
Anooraq corporate development executive Joel Kessler declined to comment on this speculation and referred to the wording of the cautionary notice.
This states Anooraq had entered into preliminary discussions with AngloPlat around “the completion of a strategic review by the parties of the assets and financing structures of, and relating to, Bokoni Platinum Holdings with a view to Anooraq effecting a restructuring transaction in respect thereof.’
Kessler told Miningmx: “When we did the deal with AngloPlat in 2009, we were completely upfront over the facts that this was a highly-leveraged debt transaction and the debt package was expensive because it was negotiated at the height of the global financial crisis.
“We also made it clear that this deal would be refinanced between 2012 and 2015 subject to market conditions, which is why one of the conditions on the bank debt was that there would no penalties for early repayment or settlement.
“AngloPlat has now taken over the bank portion of our debt. This ensures that, in the negotiations about to take place, you will have two parties with a partnership mindset sitting around the table as opposed to additional parties with a banking/finance mindset.’
Kessler was unable to provide any guideline on when the negotiations with AngloPlat would be completed.
The restructuring of the original empowerment transaction has been brought forward by the financial pressure building up on Anooraq because of shortfalls in production from the Bokoni – formerly Lebowa Platinum – mine.
Matters appear to have been brought to a head by the poor March quarter results, which show a 28% drop in platinum group metal (pgm) production compared with the December quarter.
That resulted in an operating loss of $19.2m, while the loss before tax totalled $39.1m quarter after finance costs were taken into account.
Reasons given for the production drop included the traditionally slow start-up after the 10-day Christmas break; constraints to mining flexibility; lack of mining discipline; lower delivered grade; lower recovered grade and production stoppages imposed by the department of mineral resources on safety issues which reduced working shifts by 10% during the quarter.
In broad terms, Anooraq management has not delivered on its stated aim of running the Bokoni mine more efficiently and at lower costs than AngloPlat had been able to achieve.
The Anooraq share price gained 6c to 660c in trading on the JSE on Friday.
According to one platinum analyst, the restructuring being negotiated is likely to be beneficial for the Anooraq share price.
He said: “AngloPlat cannot afford to let Anooraq fail because it is one of the pillars in the group’s black economic empowerment strategy through which it had its old order mining rights converted.
“Getting rid of that debt through selling back some of the platinum resource must boost the share price.’
