Pallinghurst expects banner year for platinum

[] — PLATINUM junior Platmin’s strategy to consolidate mining ground near Rustenburg is back on track following deals that end the impasse with its empowerment and joint venture partner, the Bakgatla tribe. Arne Frandsen, CEO of Pallinghurst Resources – the dominant shareholder in Platmin – says the deals are “landmark transactions (which) represent a significant first step to the development of the last shallow platinum group metals resources on the western limb of the Bushveld Complex’.

Frandsen reckons this year will be a key one in the development of Pallinghurst’s platinum interests matching the major progress made last year in another of Pallinghurst’s operating divisions – its steel feed corporation. The lead company in the steel feed corporation is ASX-listed Jupiter Mines, which saw its share price almost treble last year – unlike Platmin, which dropped from 1104c to 430c before recovering to current levels of around 530c.

That reflected operating problems at the mine, which lost $12.6m in the nine months to end-September and the uncertainty about the Bakgatla situation, which became public in August last year.

What precisely the problem was with the Bakgatla wasn’t explained by Platmin or Pallinghurst at the time. Asked about that at last week’s results presentation, Pallinghurst chairman Brian Gilbertson said he recognised the company had communicated poorly with investors at the time over what was happening. He maintained the dispute had “nothing to do with Platmin’ because it was between the Bakgatla and Barrick, which owned 10% of the Sedibelo platinum project, with the Bakgatla owning the remaining 90%. “We got dragged into it after we proposed a solution to the parties,’ Gilbertson said.

But what happened was that in April last year Barrick said it intended selling its 10% stake in Sedibelo to Platmin. However, the sale was blocked by the Bakgatla after legal action in August.

The settlement now reached involves a loan from Pallinghurst to the Bakgatla to help it buy Barrick’s 10% stake in Sedibelo. That’s linked to transactions through which Pallinghurst’s co-investors will buy a 49.9% stake in Sedibelo from the Bakgatla, while Platmin is buying Sedibelo West for $75m.

RBC Capital Markets analyst Leon Esterhuizen assesses the transactions as positive for Platmin, which he says is effectively buying 75% more resources for just 15% of its current market capitalisation. Esterhuizen is also upbeat about Platmin’s long-term future, pointing out the area it’s consolidating has the potential to produce up to 1m oz/year of PGMs over the next decade. He sums up Platmin’s game plan as: “Fix Pilanesberg, then build two or three more mines next door.’ That backs up Frandsen’s upbeat outlook.

However, cautious investors might want to keep in mind what’s happened over the past year at another platinum junior – Anooraq Resources (Anooraq). Anooraq also has an operating mine to fix and large-scale expansion to come from new operations. But it’s finding fixing its Bokoni mine – formerly Lebowa Platinum – to be hard going.

Anooraq CEO Philip Kotze had predicted operating costs at Bokoni would be down to R800/t by the end-December quarter. Instead, they remained stuck stubbornly at above R1 000/t, matching the levels at which former manager Anglo Platinum (AngloPlat) ran the mine.

AngloPlat was widely criticised for that performance, given that neighbouring mines were running at around R600/t. And Kotze had stated previously the new management would bring about major improvements.

Kotze now says: “There’s no reason why we can’t run at similar cost levels to the rest of the industry.’ But he acknowledges turning Bokoni around has proved a lot tougher than he expected.