Platinum juniors take a beating

[miningmx.com] — WESIZWE Platinum (Wesizwe) shares dropped sharply again on the JSE on Wednesday, falling to 168c which is marginally above the 12-month low of 164c.

That’s despite the deal announced on May 24, through which Wesizwe secured R6.6bn in funding from a Chinese consortium. This includes the Jinchuan group (JNMC) and the China Africa Development Fund, which bought a controlling 51% stake in the company.

The deal was struck at a subscription price equivalent to 207 cents per share. Wesizwe stock rose briefly to 218c on the news, compared with a 12-month high of 264c.

The share price has headed steadily south since then, despite a key clause in the agreement through which the Chinese consortium guaranteed to fund development of the platinum mine to completion.

According to the agreement, “JNMC has also undertaken that existing Wesizwe Platinum shareholders will not be called upon for any further funding for the development of the project until such time as the project reaches full production.’

That commitment was seen as a key factor, offsetting what some market observors viewed as a disappointing price paid by the consortium for control of Wesizwe because the company had sold out at the bottom of the market.

The market has not been favourable for platinum shares during the past fortnight, because of the pullback in the platinum price to levels in the mid-$1,500/oz range amid renewed global economic jitters.

Wesizwe has been affected to a greater extent than most other platinum juniors/explorers. Its CEO Mike Solomon was not immediately available for comment.

Other platinum juniors whch have been hit include Platmin – down 10% on the JSE on Wednesday – and TSX-listed Platinum Group Metals (PTM).

Wesizwe holds a 26% stake in two projects being looked at by the Western Bushveld Joint Venture (WBJV), which PTM controls by holding the other 74%.

That transaction was completed on April 22, but since then the PTM share price has fallen from a 12-month high of C$2.92 on April 30 to $1.77 at present.

PTM president Mike Jones told Miningmx in April: “We are now in a position to advance the Project 1 platinum mine and make a final decision on our strategic alternatives in the weeks ahead.

“We have a high degree of interest in the project from several different global players and financing groups, at a time when the fundamentals for platinum and palladium have never been better.’

Jones is currently in South Africa. Asked about progress on the WBJV, he said: “We have no reason to change our guidance in that a decision is only weeks away, although I did say that two months ago.’

Asked about the potential impact of current negative investor sentiment on the platinum sector, Jones told Miningmx: “Currently there’s a bull market in volatility going on. When you own an asset with a 25-year life, you cannot get too excited about week to week and month to month changes.

“In this business, grade is king and we have a high grade resource located near to surface. I cannot conceive of an outcome where our mine would not get built.’

The writer owns shares in Wesizwe Platinum