[miningmx.com] – PLATINUM Group Metals (PTM) has ditched a $195m (C$220m) project financing package for the first phase of its proposed 275,000 ounce/year Western Bushveld Joint Venture (WBJV) in South Africa in favour of issuing notes worth C$150m.
In December it announced it had raised C$175m ($164.5m) in a ‘bought deal’ after issuing 148.5 million shares for C$1.18/share.
The share issue was to BMO Capital Markets and GMP Securities which agreed to underwrite the offer. The shares were issued at a relatively slim 5% discount to PTM’s then current share price.
The company announced today it would issue 150,000 units of unsecured senior notes and warrants entitling subscribing shareholders to 55,2 million shares in PTM, equal to about 10% of the company’s issued share capital.
The funds would be used to complete finance for the balance of the WBJV project, estimated to be just over $500m in capital cost, and replaces a $195m project finance package previously agreed with Absa and Barclays Bank, among others, a year ago.
If successful, today’s notes issuance will bring to an end just over a year of uncertainty following the shock withdrawal of PTM’s then 26% partner in WBJV, Africa Wide Prospecting & Exploration (Africa Wide) in the Maseve joint venture, the vehicle through which their partnership was housed.
Africa Wide, which is a subsidiary of Wesizwe Platinum, elected not to follow its rights in the project denying PTM an initial $21.6m in funding for the project. The financing delay meant PTM would not meet its proposed mid-2015 deadline for first metal production.
PTM said in August that Africa Wide’s shareholding in its Maseve joint venture had now fallen to 17% following successful arbitration regarding the dilution.
In terms of today’s proposed financing, each warrant will have a strike price representing a 30% premium to the 15-day volume weighted average price and have a three-year maturity, said PTM in its announcement. PTM was last trading at 91 Canadian cents per share, a decline of just under 24% on a 12-month basis.
“The company intends to use the net proceeds from the financing to fund the remaining planned construction and development costs of the WBJV Project 1 Platinum Mine in South Africa and for working capital purposes,” it said.
Edward Sterck, an analyst for BMO Capital Markets in London, said that PTM would be fully funded until the end of 2014 as it reported C$161m in cash as of end-May.
“As such BMO Research does not expect any interruption to the development of WBJV project,” the broker said.
“Additionally, project finance facilities whilst appearing on the surface to be cheaper than other financing options look relatively more expensive when the cost over-run facility, hedging, collateral over company assets and limiting covenants are included,” said Sterck in his note.
There are still some regulatory boxes to check including finalising a new empowerment deal following the dilution of Africa Wide from its 26% equity position.
In terms of empowerment legislation in South Africa, mining companies operating in the country must secure a 26% black-owned partner, as well as meet other empowerment targets such as social and labour plans.
