[miningmx.com] — WESIZWE shareholders will decide in the next three months or so whether to accept a change in control of the junior development company to a Chinese consortium which stands ready to pour R6.6bn into the company to develop a 350,000 oz platinum group metal mine.
Wesizwe, having long lain virtually dormant since the advent of the financial and then global crisis since late 2008, has signed term sheets with a consortium comprising Chinese metals group Jinchuan and financiers China Africa Development Fund that would see 51% of the South African company passing over to the consortium for $227m (R1.7bn).
The China Development Bank has agreed to provide $650m (R4.9bn) in project finance once the equity component has been sorted out.
The consortium would pay 207 South African cents per Wesizwe share, marginally higher than Friday’s close at 200 cents on the JSE.
“Shareholders might be a bit unhappy that there’s no premium for control of the company, but if you look at the amount the Chinese are paying per resource ounce you’ll find that’s a fairly substantial figure,’ said an analyst who declined to be named.
“I think the probability that shareholders will say no to this transaction is unlikely,’ the analyst said. “Shareholders might be disappointed at the lack of a control premium, but now they have absolute clarity on the funding for the mine.’
Wesizwe shares closed up 10 percent at 220 cents on Monday.
The Frischgewaagd Ledig mine project has a resource of more than 13 million PGM oz and after a recent deal with its neighbour, PTM, and Anglo Platinum, the resource base climbed to almost 16 million oz. The analyst put a figure of around $34 per PGM resource oz.
Jinchuan is a good choice as a partner in the project because of their experience in the metal industry.
Wesizwe board minutes dated October 2009 said: “It is envisaged that Jinchuan would also provide for significant reduction in capex [and] allow for a reduction of approximately 30% given the use of advanced technology.’ Jinchuan is China’s largest producer of nickel and platinum.
Wesizwe CEO Mike Solomon declined any substantial comment on the matter.
The Wesizwe shareholder vote on the transaction is a critical aspect in completing the deal. It will take some three months to compile a circular, send it to shareholders and requisition a meeting for a vote on the matter. If it is approved, the funds should start flowing into Wesizwe.
Asked about the change of control and how it will sit with shareholders, Solomon said: “A change in control is always of concern and it’s a question of one goes about it.’
“If you look at the amount of money that is needed and the need to gear the company, whichever way we looked at it we would have had to dilute to a very great extent the existing shareholder base,’ he told Miningmx.
“We are building in checks and balances to ensure that existing shareholders get a fair deal while ensuring we bring money and expertise into the company so we can implement our capital construction project.’
The bankable feasibility study will be revised for a third time to double check figures and time lines, but Solomon said the cost should remain steady at around R6bn to build a 230,000 tonnes/month, 350,000 oz/year platinum group metals mine.
The Chinese consortium, which is likely to restructure the board if and when the transaction is completed, will give a timeline for the project. Solomon declined to offer any comment on the issue and he said it was up to shareholders – namely the Chinese consortium – whether he would stay on as CEO of the company he helped found, list and bring to bankable feasibility in a remarkably short period of time.
Whether another party will step in with an alternative offer for Wesizwe remains to be seen. In boardroom meetings leaked during last year’s battle for control of Wesizwe, two companies were mentioned as having an interest in Wesizwe. One was Jinchuan and the other Impala Platinum.
Analysts said it was highly unlikely that Impala would entertain a bid for Wesizwe at this stage. “I just don’t think they’ve got the appetite for this,’ said an analyst.
“Given the political issues within Wesizwe over the last year, I think it would need a very brave someone to come in at this point,’ the first analyst said.
With Jinchuan agreeing to take all of Wesizwe’s concentrate, this could render the company less palatable to any of the major platinum groups that are looking for acquisitions, the analyst said.
A key concern is the level of empowerment within Wesizwe. If the transaction goes ahead, the empowerment levels will fall by half from around 35%, which means it will fall short of the 26% needed by 2014. “We have a strategy to do that and we are discussing that with our potential strategic partners,’ Solomon said.
Of interest going forward is how consolidation of the region will play out. Since listing in 2005, Solomon has consistently spoken of the logic to consolidate the three undeveloped properties owned by Wesizwe, Canada’s Platinum Group Metals (PTM) and the Bafokeng’s Styldrift.
Consolidation around Styldrift will prove a little less simple now, with Anglo Platinum and the Bafokeng nation forming a company that will be listed and hold Styldrift and the BRPM mine.
The remaining, glaringly obvious option is PTM, which is the shallower extension of the ore body Wesizwe will mine.
PTM, which found itself in exactly the same predicament as Wesizwe of being unable to raise funds because of the downturn in the market and awaiting regulatory approval for transfer of land with its neighbour, has said among the options open to it is an outright sale or bringing in a strategic partner.
Solomon said the pressing priority for Wesizwe was to build a mine. “Our first focus is to get a hole in the ground and then look at conquering the world,’ he said.
Wesizwe has a 26% stake in the Western Bushveld Joint Venture, with PTM owning the rest.
