As the consolidation of embattled and unprofitable platinum mines gains pace, Royal Bafokeng Platinum (RBPlat) will raise up to R1.4bn to buy the Maseve mine, concentrator and tailings facilities on which funders of the Canadian owner have turned their backc.
Northam Platinum CEO Paul Dunne said a few months ago that the local platinum sector, the source of 80% of the world’s refined platinum, had reached a point where mines would either close or be consolidated as low prices and rising costs pushed the industry to the edge. Anglo American Platinum CEO Chris Griffith estimated that two-thirds of SA’s platinum mines were unprofitable and that the situation was unsustainable.
The consolidation option was logical for the Maseve mine to the immediate south of Sun City in North West after shareholders and funders of Toronto-listed Platinum Group Metals (PTM) grew tired of repeated calls for cash to ramp the new mine to full production as the company missed target after target.
PTM will use the $74m to repay $89m debt it incurred trying to bring Maseve into production and focus on its Waterberg discovery. “We do believe we have settled on terms which will benefit the two companies and all stakeholders,” said PTM CEO Mike Jones.
An analyst speaking on condition of anonymity said while Maseve might have been a success at higher prices there was no surprise that it had failed at sustained lower platinum group metal prices and that repeated efforts by PTM to sell the mine had met with little to no interest from mining companies well aware of its difficulties.
Analysts said the inability of the Canadian company to bring the relatively small Maseve mine into production on time and budget had caused it reputational damage, raising the question whether funders would be interested in backing PTM’s management by investing in the Waterberg prospect or if the company should sell it to realise the best value for badly burned shareholders.
RBPlat, which is building the Styldrift platinum mine next to Maseve, wants the surface infrastructure of the recently commissioned Maseve concentrator and the underground mine to give it an attack point to more quickly and cheaply gain access to the thick Merensky Reef just across the boundary with the Styldrift property.
“It’s a very good deal for RBPlat. They are getting the whole package for less than it would have cost to build that concentrator. We would have preferred a slightly lower price for the assets though,” said Nedbank mining analyst Leon Esterhuizen, suggesting that R500m would have made more sense.
RBPlat has already spent R7.23bn on Styldrift, which will reach its first-phase target of 150,000 tonnes of ore a month by the end of 2018. RBPlat said on Wednesday that the Maseve transaction would occur in two stages, with the surface infrastructure the first target and then ownership of the mine through the purchase of the holding company called Maseve, which PTM owns, along with a subsidiary of Wesizwe Platinum.
RBPlat will buy the surface infrastructure for $58m and the full ownership of the jointly held Maseve for $12m. The transaction will be in cash raised in a rights issue of up to R1.4bn and shares. Maseve was valued at R3.6bn at the end of July.
“The plant transaction provides RBPlat with immediate access to an operational concentrator plant to treat ore in respect of Styldrift I and the strategic flexibility to potentially extend the life of mine of the South Shaft Merensky operations,” RBPlat said.
One of the conditions for the second part of the deal was ministerial approval for the transfer of mineral rights to RBPlat. However, Mineral Resources Minister Mosebenzi Zwane
until recently wanted a moratorium on mining-rights authorisation and rights transfers pending the outcome of a court case brought by the Chamber of Mines challenging the third version of the now suspended Mining Charter.