PTM to miss mid-2015 platinum sale target

[miningmx.com] – PLATINUM Group Metals (PTM) would fail to meet its mid-2015 target for first metal sales from its $506m Western Bushveld Joint Venture (WBJV) project following the ‘surprise’ decision of 26% shareholder Africa Wide Prospecting & Exploration (Africa Wide) to withhold $21.6m in funding.

The disclosure was part of an announcement in which the Vancouver company named Barclays Bank and Absa Bank as part of a syndicate that had agreed to raise $195m for the project designed to produce 275,000 ounces a year in platinum group metals.

Africa Wide is a subsidiary of Wesizwe Platinum through which it owns 26% of WBJV Phase 1. Wesizwe Platinum is 45% by Jinchuan. Africa Wide and Wesizwe Platinum hold their shares in WBJV Phase 1 through the operating company, Maseve Investments.

PTM said on October 18 it had been informed that Africa Wide would not be following its rights, an announcement that knocked nearly 19% off PTM’s share price. On October 21 Wesizwe said WBJV did not satisfy its investment criteria.

Commenting on the new financing announced today, Michael Jones, president and CEO of PTM said: “We are pleased to move forward with an experienced global set of financial institutions in a structure for the WBJV Project 1 that does not require the direct participation of Wesizwe”. Shares in PTM had mostly recouped the value lost in October.

As a result of its decision to withhold finance, Africa Wide’s stake in the project would be diluted to 21%, PTM said. It added that it was seeking to sell the diluted points to another empowerment company. An analyst said it was possible that Wesizwe would sell its investment in WBJV through Africa Wide completely.

It also said that the new loan mandate required certain restrictions including PTM’s ability to transfer interests in the Waterberg deposit, a property situated in the northern limb of the Bushveld Complex in South Africa’s North West province.

Leon Esterhuizen, an analyst for CIBC Capital Markets, described the Waterberg property as “a company maker” and could see PTM put in play given the $600m to $800m needed to develop it.

The loan facility agreement with the syndicate, that also includes Societe Generale Corporate and Investment Banking and Caterpillar Financial, would require a cost over-run facility, and metal and currency hedging. This was not dissimilar to conditions placed on previous finance raised by the company for the project, an analyst said.

PTM said it had continued work on WBJV Project 1 at “a moderated pace” and had frozen new procurement contracts. Commenting on the likely delay to first production and then sales, the company said it would “… be working on a revised financial model for the revised loan mandate”. An updated project schedule would be provided when it was available, it said.

“We … remain concerned regarding the risk of substantial project delays at the WBJV, BEE empowerment risk from the potential dilution / sale by Africa Wide of its qualifying stake in the WBJV and a likely medium term shortfall in funding to project completion,” an analyst said.