The fast tracking of this project relies heavily on Xstrata taking up the JV option with Nkwe/Genorah.Not that the project relies on the JV for ultimately going ahead if the JV didnt happen.But if we are to see this happen within 2-3 years then imo the JV would need to happen.
So after an interesting short conversation with a mining industry participant with Xstrata synergies Ive done a bit of digging to see just what Xstrata's intentions are with this project and it wont surprise many of the seasoned NKP followers as to what was found.
Its interesting to note some comments from Xstrata bosses and we arnt simply talking publicist comments.And what I find even more facintaing is the positivity of the comments and words used in various interviews/items.
* This from the CFO of Xstrata Alloys Mark Moffat.
"Xstrata Alloys CFO Mark Moffett added that this represented an exciting opportunity given the miner's stated objective of becoming a significant player in the PGMs market.
Moffett commented that this agreement would be COMPLEMENTARY to the bid Xstrata had made for Lonmin earlier on Wednesday. He explained that the proposed acquisition of Lonmin would allow it access to producing operations in the short term, while its partnership with Nkwe and Genorah was an "exciting growth opportunity."
I note in particular the word COMPLEMENTARY and the last I knew the definition of this word was "in addition to".So even if any mergers/T/O's went ahead Xstrata still intend to advance this project.
* I also note that this project gets a mention as one of the promising greenfields JV's in Xstrata's 09 half yearly.I dont know about everyone else but I rarely see a conglomerate like Xstrata mentioning such potential JV's in reports UNLESS they have serious intent with respect to those JV's.
* I was also having a listen to Mick Davis in the half yearly 09 webcast and he pointed out that their intentions with regard to the Sth African Pt/Pd industry was one of LONG TERM establishment which meshes well with the concurrent study into the smelter/refinery(with the Garatouw/Tubatse BFS) that could be established on this arm of the Bushveld.I get the feeling that this was to be a fall back option if the Anglo bid failed to materialise,which does looks all but dead.But one can never discount Xstrata making another offer.
But as a very recent post pointed out Anglo arnt without big problems with some of their assets so its not surprising Xstrata arnt exactly rushing to up the ante for such a merger.
* Then we have Xstrata Alloys CEO Peet Nienabar
This transaction provides Xstrata WITH ENTRY into the prospective Eastern Limb region and access to a significant, continuous PGM block. The joint development of these properties with Nkwe and Genorah, together with a downstream processing operation, WILL PROVIDE significant growth in mined production and refining for all partners, helping to establish Nkwe/Genorah as an independent, integrated producer of scale and adding further growth potential to our rapidly developing platinum business.
Not words that any large company in any doubt of a potential JV would use imho.
* As an aside I remember in the webcast Mick Davis was asked in they couldnt merge with Anglo what other options did they have in regards to the iron ore industry to which Davise replied they would be looking for greenfields growth ops as well.It seems this annmnt
would confirm such greenfields iron ore growth intentions and a confirmation of Davis's comments that Xstrata had essentially given up on the Anglo T/O and hence any potential synergies that might have existed with projects like Modikwa in the eastern Bushveld. ----------------------------------------------------------- If Xstrata boss, Mick Davis, really has walked away from big company takeovers then how will he satisfy his lust for platinum? The answer will surprise, but no more so than a statement that came out from Davis earlier this week that he has abandoned the takeover trail. On Tuesday, the mining worlds most aggressive acquisitor said that after failing to secure a merger with the worlds biggest platinum producer, Anglo American, investors should not hold their breath for an early return by Xstrata to the takeover trail because company transforming deals had become too difficult.
So in my search for Xstrata intentions on this JV(and confirmation of that industry participants comment) all I come up with is unambiguous,clear,transparent comments from the Xstrata hierarchy and this simply confirms some recent positive comment from someone with Xstrata industry synergies that I might just be correct about this actually taking place;-)
"Hurdles remain to be cleared, but it is reasonably obvious to a casual observer that a go-ahead on Garatau and Tubatse is little more than a formality, because demand for PGMs remains strong, along with the price; because Nkwe has resolved lingering local issues, including black empowerment; and because Xstrata wants a way into the platinum industry; and because the government of South Africa wants fresh investment. Its what might be called a NO-BRAINER, but with a few ts to cross and is to dot."
Im rapidly coming to accept the NO-Brainer tag for this JV.
d.
NKP Price at posting:
63.5¢ Sentiment: Buy Disclosure: Held
