LONG-RUNNING talks between platinum exploration company Platfields and an international funder have ended, raising the possibility that a rights issue may be required to ensure the future sustainability of the company.
The international financing house was concerned about labour instability “and continuously moved goal posts”, CEO Bongani Mbindwane said. The negotiations have been ongoing since November 2012 and Platfields could no longer provide extensions, he said.
The platinum sector has been negatively affected by labour unrest since January 2012, when a battle for members between the Association of Mineworkers and Construction Union (Amcu) and the National Union of Mineworkers (NUM) led to the first of a wave of unprotected, violent strikes.
More than 70 000 Amcu members are currently striking over wages at Impala, Lonmin and Anglo American Platinum (Amplats).
“External factors are largely affecting the industry and the growth of new entrants. Most juniors have struggled to raise cash for operations. International finance, which is the only reliable source for the sector, requires stability. Talks of nationalisation and Amcu militancy have not assisted South Africa in raising this interest,” he said.
As Platfields is not cash-generative, it relies heavily on positive market sentiment and sector fundamentals, Mbindwane said. “These have continued to be extremely negative with no positive horizon projected.”
Platfields shares have been suspended on the JSE since July 2013 after the company failed to produce financial statements on time. It last published results for the six months ended August 2012, which showed a cash balance of R2.66 million, exploration assets worth R55.2 million and long-term liabilities of R36 million.
Mbindwane said the financials “are now completed and will be released in weeks”. The delay is partly attributable to cash constraints in the business, he said.
Various cost-cutting measures were implemented to preserve cash, including the retrenchment of all management and administration employees, the suspension of directors’ fees and placing gold and platinum exploration projects on care and maintenance.
Platfields’ main exploration asset is the Leeuwkop project in Limpopo’s Sekhukhune district. The company is seeking R100 million to define a resource at Leeuwkop and to cover the potential purchase from Amplats of the remaining area of adjacent Tigerpoort.
Negotiations with Amplats to conclude the Tigerpoort acquisition have gone quiet, Mbindwane said.
The JSE did not immediately respond to queries about Platfields’ listing. Mbindwane said the listing has proved to be “extremely costly with zero return or benefit accrued”. A continued listing of the company will depend on shareholders and has not yet been discussed, he said.