[miningmx.com] – SHARES in Atlatsa Resources responded positively to yet another iteration of the group’s capital structure and plans in which production growth is throttled back, debt is reduced, and platinum group metal (PGM) minerals contained in projects is sold.
Atlatsa Resources, which owns the Bokoni Mine in the northern part of the Bushveld Complex in the North-West province, gained 5.5% to R2.11/share on a day when the shares of Impala Platinum and Anglo American Platinum (Amplats) lost value.
Interestingly, Amplats was about 4.3% weaker after it announced it had agreed to the refinancing in which it subscribed to more shares in Atlatsa and rehashed the terms of a much-reduced debt package to its now 22.5% BEE investment, deemed by some as the empowerment deal it dare not let fail.
Atlatsa’s Bokoni mine will now build up to 250,000 ounces a year of PGMs over a five-year period at a cost of R1.1bn. This compares to the 300,000 oz/year target announced in Atlatsa in its last restructuring just over a year ago.
The restructuring was revisited this year owing to changed conditions in the platinum market and the negative affects of a two-month strike at Bokoni mine in the final months of last year.
Poor market conditions, and a surge in costs has also seen Amplats ask joint venture partners to close unprofitable shafts while it is applying the finishing touches to its own 400,000 oz/year reduction in output at a cost of some 14,000 jobs.
In addition to lowering production, in which some R2.3bn in capital spend has been deferred to beyond 2020, Atlatsa has also sold some 31.4 million ounces of minerals contained in the Ga-Pasha East and the Boikgantsho project to Amplats for R1.7bn.
Amplats also bought new shares in Atlatsa Resources for R750m which, combined with the sale of the mineral rights, reduces Atlatsa’s debt to R833m. Loan finance on very easy terms – an average interest rate of 2% from 13% on previous debt – has also been provided to Atlatsa to help it build its Middelpunt and Brakfontein underground projects.
While the underground projects scale up, Atlatsa will supplement production from the old sections of Bokoni with open cast production, but only on a temporary or “filler” basis as the open cast mine has only a six-year life of mine, said Joel Kesler, chief commercial officer of Atlatsa.
Kesler said the addition of the open-cast production will make Bokoni a predominantly Merensky producer. Merensky ore is generally higher grade than the UG2 production the company is foresaking until platinum market conditions revive.
The recapitalisation of Atlatsa Resources was conducted assuming an average rand platinum price of R10,400 per PGM ounce. “This compares to the current price we’re getting of some R11,900/PGM oz,” said Kesler.
In essence, Atlatsa has reduced debt by 75% as well as the cost of borrowing which has fallen 85%. Production growth is more modest, but it is fully-funded.
Amplats has also reduced its exposure to Bokoni from 26% to 22.5% after the partners abandoned a “B” preference share structure selling them to Atlatsa Holdings and creating a single class of common shares.
Of course, this is all a far cry from the original 2009 deal between the parties, a transaction that was constructed even earlier, before the financial crisis in 2008, when the platinum market was at its zenith. As Kesler has repeatedly said, however, empowerment is a process – one that has proved very expensive for Amplats.
Said Chris Griffith, CEO of Amplats: “Atlatsa and the Bokoni will be well positioned to implement its business strategy on a more conservative, lower risk and sustainable basis.
“The acquisition of the eastern section of Ga-Phasha and Boikgantsho provides Anglo American Platinum with access to mineral properties that provide synergies with its operations at Mogalakwena and Twickenham,” he said.
