PLATINUM Group Metals (PTM) last week unveiled a new major recapitalisation programme in which it will raise capital through new share issues, including one with its South African partner, and enter into a $20m credit facility.
The recapitalisation could suggest growing confidence in PTM’s platinum group metals (PGM) project in South Africa’s northern Bushveld. The project, known as the Waterberg Joint Venture, is currently being studied by Impala Platinum (Implats).
PTM and Implats extended the project study period an additional four to five months in April during which time the palladium price has shown significant strength. The Waterberg Joint Venture is rich in palladium, as well as platinum.
In terms of its financial engineering, PTM has issued about 8.3 million new shares for $1.25/share to BMO Capital Markets raising around $10m. PTM is currently trading at C$1,61/share, the equivalent of $121/share.
The proceeds of the capital raise will be used to settle debt with Liberty Metals & Mining Holdings, a long-standing creditor of PTM, which will also subscribe for shares in PTM totalling $10m.
In addition to this, PTM has entered into a new credit facility totalling $20m with lenders led by Sprott Private Resource Lending II. The maturity date of the new credit facility will be 24 months from the date of the first advance under the facility.
Finally, PTM has also agreed with a subsidiary of its South Africa black economic empowerment partner, Hosken Consolidated Investments, in which it will issue 940,000 shares for $1.32/share, raising $9.2m.
“We are very pleased to enter into these agreements with the support Hosken Consolidated and Liberty as shareholders,” said Michael Jones, CEO of PTM in a statement of the latest share issues. “When closed, the transaction will significantly reduce and defer secured debt, as we continue our work on the Waterberg Project,” he said.
If Implats likes the Waterberg prospect it will extend its current 15% foothold in the project into a $165m investment owning 50.01%. Implats will also develop Waterberg.
Implats, which is due to report its full-year numbers for the 2019 financial year on September 5, said on August 15 headline share earnings would come in between 406 and 440 South African cents per share. This compares to a 171c/share loss in the 2018 financial year and reflects the impact of a weaker domestic currency especially when the dollar price of the basket of PGMs is firing on all cylinders.
It also means Implats’ balance sheet will be in a more robust position than a year ago which means investment in a potentially strong growth project will be more within its orbit. Shares in PTM fell just over 10% in the last seven days.