[miningmx.com] — IT MUST be testament to Bernard Swanepoel’s entrepreneurial endeavour that many of his charges at Harmony Gold, where he was CEO for 12 years until August 2007, embarked on solo careers of their own.
This is no better demonstrated than a quick glance at the mining plan of the northern cluster of the eastern bushveld complex where no fewer than three ex-Harmony executives control neighbouring properties, in platinum.
To the north east, Philip Kotze, who headed Harmony’s corporate affairs, now holds sway over the Bokoni Platinum Mine, owned by Atlatsa Resources Corp, formerly Anooraq Resources.
Moving westwards, there’s Swanepoel’s own platinum exploration prospect, the Phosiri mine which is owned by Lesego Platinum which Swanepoel’s Village Main Reef Gold controls with a 75% stake.
Down dip of both is the northern cluster properties of Bauba Platinum of which former Harmony executive Pine Pienaar is the CEO.
Though an emerging figure at Harmony, Pienaar became prominent as CEO of Mvelaphanda Resources which, through its investment in Northam Platinum, may make him the most experienced in platinum exploration of his ex-Harmony peer group. But there’s much to do for Pienaar, nonetheless.
He requires, for instance, more capital having been disappointed to raise only R18m in July this year against an original target of R150m target which was lowered to R60m when it was realised the market for such activities was poor. Bad timing accounted for the lower-than-expected book-build, says Pienaar.
What’s in the offing is some ten million shares in Bauba in an effort to raise a further R45m. This prices each Bauba share at R4,50 which might be a tad ambitious considering the share, which is pretty illiquid, currently trades at R3.10/share.
Still, Bauba represents an interesting opportunity. Pienaar claims that the company wants to become an operator, but given that its minerals are down dip its neighbours, and therefore deeper (but not deep by new platinum resource standards), it would seem that its chief advantage is its ability to provide bolt-on expansion, possibly in joint ventureship.
I struggle to see Bauba as a standalone operator until platinum mining depths of 2km become par for the course. There are mines at, or close, to this mining depth already such as Anglo Platinum’s Amandelbult, the Impala deeps projects, such as 16 shaft, and Northam Platinum itself.
But capital had already been sunk into many of these mines already whereas new, deep mines have found sufficient capital raising difficult to achieve. Take Jubilee Platinum’s Tjate project for instance.
Jubilee Platinum must sink a shaft more than 1.5km deep and has since resorted to retreatment of surface tailings for an interim buiness plan. Bauba Platinum is a long-range prospect, a slow burner but an interesting one at that.
GOLD ONE INT’L
Neal Froneman, CEO and president of Gold One International, is another ex-Harmony executive. Froneman is remembered most, however, for the extraordinary change in fortunes while fronting Uranium One. He quit Uranium One after a series of missed production deadlines at Dominion, the company’s centrepiece South African uranium mine.
Missed production targets have been a recent feature at Modder East, Gold One International’s flagship mine. Full year production is now expected to be 65,000 ounces against previous guidance of 80,000 oz and 85,000 oz before that.
Ilja Graulich points to the fact that, unlike Dominion, Modder East has the geology to produce the metal. “It’s not going away. It will just be mined later than expected,’ he says. He also points to the fact Modder East is producing cash flow and that the other burning problem in Gold One’s life, some $65m in capital raising required to repay bondholders, will be finalised albeit using unpopular hedging techniques to secure the risk for the counterparties.
Says Leon Esterhuizen, an analyst at RBC Capital Markets: “Although GDO continues to ramp up production and generate positive cash flows we are still disappointed by the constant pull back in guidance.
“We also believe that the continued drag on finalising the $65m debt facility (taking it all the way to deadline) serves to add significant risk and hence puts pressure on the share price. We believe these issues will overshadow the increasing production volumes and positive cash flow and we re-iterate our view that a rerating will only be achieved once the company starts hitting its production and cost targets’.
Graulich makes the point that the $65m, which he believes is imminent, may not even be required if bondholders decide not to cash in. In these days of a $1,357/oz gold price, it wouldn’t be wise to bail out of a promising gold mining firm just because production is slower than planned; in fact, investors should probably expect missed production targets.
Any new gold mining development in South Africa, apart from being rare these days, is difficult as the juicy ore has gone, or is owned by the majors. Just ask Ferdi Dippenaar, another of the Swanepoel academy, whose Great Basin Gold is to produce finally its first gold from the Burnstone mine. Still, the clock is ticking for Froneman & Co.
