David McKay | Wed, 27 Nov 2013 11:29
] – PLATINUM Group Metals (PTM) is in dispute with Wesziwe Platinum subsidiary, Africa Wide Prospecting & Exploration Company (Africa Wide), over the extent of the latter’s dilution in PTM’s Western Bushveld Joint Venture (WBJV).
WBJV is a platinum project in South Africa endeavouring to bring 275,000 ounces of platinum group metals to the market from mid-2015, although that date for first production is unlikely to be met. The project suffered a setback on October 18 when 26% empowerment partner, Africa Wide, elected not to follow its rights which involved funding the next tranche of its portion of Project 1, an investment sum of $213m.
Commenting in its annual results published on November 26, PTM also said that it may have to alter its business plan if it failed to arrange alternative finance for Project 1. This may involve suspending phase 2 of the WBJV and selling ore already mined from Project 1.
Africa Wide said in an announcement earlier this month that it would be diluted by about 3.5% after declining to follow its rights in the WBJV. PTM, however, says the dilution is 5%. It is also hoping to sell Africa Wide’s diluted stake to another empowerment partner.
“Africa Wide contends the dilution will be approximately 3.5% and Africa Wide’s actual dilution has been submitted to arbitration. The company is working on a plan to sell Africa Wide’s diluted percentage in Maseve (the operating company that houses the partners’ respective interests) to another bona fide black economic empowerment partner,” it said.
It seems unlikely, however, that PTM will make progress on this transaction until arbitration has been settled. Africa Wide’s stake in WBJV would reduce to about 21% in PTM’s estimation. PTM said it was pressing on with discussions ahead of securing $195m in bank finance through a syndicate of banks including Barclays Bank, Absa Corporate and Investment Bank, Caterpillar Financial, and Societe Generale Corporate & Investment Banking. This would replace most of the $213m equity finance Africa Wide was supposed to contribute in terms of its 26% holding.
“The new mandate letter will build upon previous technical and legal due diligence, and is subject to the finalisation of a facility agreement, among other conditions,” PTM said in its commentary. Africa Wide said on October 21 that the WBJV did not “satisfy [its] investment criteria” and was therefore not following its rights.
Another member of the previous loan finance mandate, Standard Corporate & Merchant Bank, seems to have withdrawn from the project. In the event that PTM failed to secure lender finance it would either source alternative debt and/or equity financing or suspend phase 2 of WBJV and sell ore from established underground workings at Project 1.
“In this second scenario, a milling and concentrating facility would not be immediately built, and the construction of such facilities may be postponed until funding became available or indefinitely if attractive offtake terms and costs could be confirmed,” PTM said.
For all its difficulties, PTM’s share has performed astonishingly well. The stock is back to C$1.40/share, about 7% off its 12-month intraday high of some C$1.47/share.