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August 09, 2013

Jubilee Platinum Renegotiates Its Acquisition Of Platinum Australia On Far Better Terms
By Alastair Ford

Colin Bird is pretty pleased with the revised terms he’s managed to secure for Jubilee Platinum in its bid to acquire the assets of Platinum Australia.


Under the terms of a deal announced at the end of 2012, Jubilee had offered Platinum Australia shareholders one Jubilee share for every 2.593 Platinum Australia shares held.



So far so good.



The market wasn’t cock-a-hoop at the deal, but then equity markets have been sour for months and the platinum price has weakened significantly as 2013 has progressed. It would take a lot to get today’s jaded resources investor jumping up and down with excitement.



All the same, there was no escaping the fact that Platinum Australia was a distressed seller, and that Jubilee would be doing most of the legwork when it came to getting the Platinum Australia assets financed.



On the whole, Colin felt the deal should reflect that fact, and that Platinum Australia shareholders shouldn’t be overly rewarded for Jubilee Platinum’s efforts.



“We were of the opinion that they were getting too much of the company”, says Colin. So, fast forward several months and with a US$10.5 million project-level debt facility now in place, a new deal has been struck.



Under the previous deal, Jubilee shareholders would have accounted for 64 per cent of the enlarged group. Now, the ratio of shares on offer to PLA holders has been moved out to one Jubilee share for every 5.68 Platinum Australia shares, meaning that Jubilee’s current shareholders will account for 83.5 per cent of the enlarged entity.



“It’s very, very good for our shareholders”, says Colin simply, and it goes a long way to demonstrating who really has been calling the shots on this deal.



The plan now is to get the tailings at Platinum Australia’s Smokey Hills mine into production as soon as possible, and to bring the mine itself on stream in due course.



“We’ll bring the mine back into production when the platinum price improves”, says Colin. “The tailings can keep us going for the rest of the year. The mill will be kept busy with tailings first, and third party ore.”



That way, says Colin, “I think we take the pressure off Smokey Hills”.



It’s perhaps worth bearing in mind that the deal is not yet absolutely finalised, but it looks as though it should get a clear run from here on in. “All the shenanigans, all the choreography is finished now”, says Colin.



Having said that, making these significant changes to the original deal has meant that the date for closing it all off has now been put back to September 30th, from July 31st. But that’s par for the course, and doesn’t seem to be alarming Colin unduly.



Instead, he’s more concerned with keeping a close eye on where the Platinum price goes from here. The original squeeze on Platinum Australia was caused by the company’s inability effectively to respond to the weakness in the platinum price that hit markets in the wake of the global financial crisis.



More seasoned investors may recall that a clear warning was given that Platinum Australia might very well come unstuck when those canny money-men at Anglo Pacific very publicly sold down their entire stake.



In retrospect, that move was just one more reason why London’s junior mining sector holds Anglo Pac in considerable regard, although at the time the Platinum Australia management squealed in outraged protest.



Platinum is off its lows now, but it still has some way to go before it recaptures the US$2,000 highs hit in early 2008.



One thing that’s been dragging it down lately, in Colin’s view, is its tendency to track gold. “It’s got to de-couple soon”, he says. “With all the problems in the industry with Lonmin and Anglo, supplies aren’t that great.”



And, with the US economy beginning to show signs of recovery, a major pick-up in demand may not be too far off.



After a long time working out where all the pieces fit, Jubilee’s “mine-to-metals” strategy may finally be bedding down at just the right time.



The company will continue to have access to the refining and smelting operation in Middelburg, tailings at Smokey Hills will provide early product, while longer term there’s Smokey Hills itself and Jubilee’s own Bushveld property, Tjate.



It’s been a bumpy ride but the future shape of Jubilee is now starting to emerge.

http://minesite.com/news/jubilee-platinum-renegotiates-its-acquisition-of-platinum-australia-on-far-better-