The forum boards in the uk are starting to heat up. Plenty of noise.
The price of Platinum is also on the up and up, and the gold price premium over platinum looks to be unwinding. Perhaps pricing fundamentals are finally kicking back in? This I hope will help in a more positive outcome for shareholders as Macquarie might accept a bigger discount on their debt?
Anyhow a couple of interesting snippets in the article (Macquarie debt/equity split - 60/40 and the remarks regarding key PLA people); read below...
Jubilee Platinum’s Proposed Merger With Platinum Australia Could Deliver 65,000 Ounces Of Annualised Production By The Second Half Of This Year
By Robert Tyerman
In the shell-shocked world of South African platinum producers, the misfortunes of some participants can present unrepeatable opportunities for others.
That is how Leon Coetzer, chief executive officer of Jubilee Platinum, describes the merger his company is negotiating with Platinum Australia (PLA), a company sent into administration by problems at its Smokey Hills platinum project in South Africa’s Bushveld.
Having signed heads of agreement on a deal which would involve taking over PLA for shares, Jubilee sees “an enormous opportunity”, declares Coetzer.
Jubilee is currently engaged in treating and processing platinum group elements tailings from another company’s Dikolong chrome mine in the region, but will be, says Coetzer, “a dramatically different company” after the merger is consummated.
If all goes well the deal should be done by March, he adds.
Jubilee is presently valued on Aim at £25 million after a halving of its share price within a year to 8p. But if present hopes are realised, by 2020 it could become a significant world producer of platinum from its Tjate project in the eastern Bushveld.
And at that stage the platinum price might conceivably be more robust than today.
The company has 63 per cent of Tjate, which holds an estimated 70 million ounces of platinum group metals.
If the merger goes through, the next seven years will be crucial for this transformation, argues Coetzer, a South African chemical engineer with 16 years’ experience at Anglo American Platinum.
He took over as chief executive officer at Jubilee in 2010 from entrepreneurial British small mining company player Colin Bird, now Jubilee’s chairman.
At present, Jubilee has its processing treatment, using a proprietary technology called ConRoast, for which it can receive fees and tolls. But these are being squeezed in a market where platinum has fallen from more than US$2,200 an ounce in 2008 to around US$1,591 today.
The company also wants to move towards selling its own treated tailings. At present, Jubilee needs a concentrator to upgrade and process the tailings properly. According to Coetzer, that could cost £8 million and take 15 months to bring in, luxuries to which Jubilee scarcely has access.
Jubilee’s shares hit 130p in 2007 but recently the company raised £1.7 million at a mere 8.5p.
Coetzer, who sees the PLA deal as the successful outcome of an “aggressive” quest for solutions, explains that it would deliver Platinum Australia’s Smokey Hills mine’s concentrator to the combined group.
Leon ascribes previous problems at Smokey Hills to Platinum Australia’s inability to afford appropriate equipment amid weak platinum prices.
But he reckons he can bring the project back into production in the second half of 2013 and have it delivering more than 65,000 ounces a year, with a potential for 80,000 ounces annually looking ahead.
According to Coetzer, the total funding needed to re-start Smokey Hills would be around “US$25 million, 60 per cent debt and 40 per cent equity”, ring-fenced entirely to the project and not applicable to the public company.
He envisages a high-margin operation, with costs kept to “between US$800 and US$820 an ounce”, thanks partly to the contribution from tailings, costing an expected US$450 an ounce and bringing the overall cash cost down from US$950 an ounce.
Mining is fairly straightforward because the deposit is in a hill, which means “there is no need for a mineshaft and you can almost walk into it”. Coetzer says potential lenders are already considering Smokey Hills.
He suggests it could have a mine life of seven years, which conveniently also happens to be the length of time he reckons it could take to bring Tjate into production, if all goes to plan.
To enhance its finances, Jubilee has accepted a near-£6 million offer from an unnamed South African mining company for Quartzhill, a small part of Tjate.
The company also hopes to fund early development of the 4.5 million ounce Rooderand mine in the western Bushveld from some of the cash flow from Smokey Hills.
Suggesting some key PLA people would play a part in the merged group, Coetzer argues Jubilee’s “opportunism” is now paying off. If all the pieces fit, he could be right.
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