xstrata poised to strike a deal with nkp

We have all heard these stories of how Xstrata has played hardball with their junior partners in the past .

NKP is a different kettle of fish to any of the others .

Copper ,and other base metal juniors are a dime a dozen ,and really ,the majors can pick and choose from many projects from many different countries around the world .So ,yes they can negotiate better deals .

Why is NKP different ?

Well,the platinum sector has massive barriers for entry .

For one , nearly all PGMs produced in the world come from one area called the Bushveld ,in one country ,South Africa .

If you want to be a platinum miner ,you are limited in your choice to one country ,and one area of that country .

Then, if you are a major ,you need scale .This dramatically limits choice even further .

Xstrata are basically limited to a handful of potential PGM deposits ,or mines . Xstrata has been down the takeover path already with Lonmmin and Anglo ,which both failed .
Mick Davis gave up ,saying that takeovers have become too hard ,and too costly .

Now that doesnt leave too many options left .

Nkwe offers scale or size like no other deposit ,that is not already controlled by a major .

Some of you may be unaware that Anglo actually owned this ground previously and had it taken from them ,and through good luck or good management or a combination of both ,Nkwe wound up with it .Then Anglo mounted a protracted legal challenge in court ,that Nkwe eventually won .
Pretty impressive David and Goliath stuff .

The point of all that is that the Nkwe properties and the Anglo properties adjoin for something like 30 kilometres .Anglo would dearly love to have this property back ,and are a natural rival for Xstrata ,as these properties are highly synergistic .

Xstrata dont have the luxury of too much negotiation leverage over NKP without losing the upper hand they currently enjoy .
Not only that ,we now we have another wildcard with the Chinese .The Chinese are now making their move into PGMs ,and I think this will accellerate in the near future .

NKP has a plum asset ,and a very rare ,if not a once in a lifetime opportunity for whoever lands it .

Mick Davis has stated his aim is to grow Xstratas PGM business to be one of the top producers in the world

I am hard pressed to come up with any logical commonsense reason why Xstrata will let this go .

One last ace for NKP to keep Xstrata honest is the BEE laws in SA .

If Xstrata want to do business in SA ,they really have to behave in their negotiations otherwise they may find doors shut in SA .

Going back to Xstratas dealings with other base metal juniors ,there is a very different set of checks and balances with this situation that those other companies didnt have the luxury of .

There is no question in my mind that Xstrata will take this ,and for the reasons I have outlined Xstrata dont have much leverage to stall this deal .

The complexity of these BFS is largely lost on some investors and the time and detail involved in this is probably not appreciated .This can give rise to conspiracy theories ,like delaying etc ,but really ,this BFS is being handled by contract ,and NKP have as much input if not more than Xstrata .Xstrata cannot delay the BFS by themselves ,and I think these kinds of comments are unfounded .

I believe this deal will be concluded ,but there could be changes to the original option deal .

If Xstrata dont reach their return on investment hurdle ,then I could see the possibility that Nkwe may be asked to contribute a modest amount towards capital costs .

I see this as a worst case scenario ,but has to be considered .

That said ,with the revised BFS,I believe the return on investment will be more than adequate to get NKP and Xstrata over the line to consummate the deal under the original agreed terms .