David McKay | Tue, 10 Dec 2013 11:05
PLATINUM Group Metals (PTM) has turned to equity finance in an
attempt to advance the development of its $506m, 275,000 ounce a year
Western Bushveld Joint Venture (WBJV) platinum project after its 26%
partner Africa Wide Prospecting & Exploration (Africa Wide) declined
to fund a tranche of the project in October.
The company announced it would raise C$175m ($164.5m) by means of
issuing 148.5 million shares for C$1.18/share to BMO Capital Markets and
GMP Securities which have agreed to underwrite the offer. The shares
were issued at a relatively slim 5%
discount to PTM’s current share price.
However, the share issue still leaves an estimated C$141m ($132m) of the
project to finance – a difficult ask as PTM’s former banking syndicate,
which involved Standard & Corporate Bank, pulled out of the project
after initially setting its sights on providing a $260m loan.
More recently, PTM said it hoped another syndicate, which involved
Societe Generale Corporate and Investment Banking and Caterpillar
Financial, as well as Barclays and Absa banks, would help it raise
C$207m ($194m) – a lending avenue about which PTM did not allude in its
In terms of the under-writing, described as a bought deal, the lenders
will provide the funds directly to PTM and then seek the support of PTM
shareholders. The banks have been granted a additional 15% of the
offering in the event of an over-allotment.
Bought deals are normally issued at a steep discount to the ruling price
so the narrow discount involved in PTM's offer is another indication of
the Canadian firm's following.
It remains to be seen, however, if shareholders see the value of the
share issue when the sit down to consider it.
Johannesburg-listed Northam Platinum entered into a similar fund-raising
structure issuing 15 million shares for R40/share only to see less than
half its shareholders accept the offer. This means the majority
shareholders would prefer to be diluted than buy more shares in Northam
Platinum, currently dealing with a potentially crippling strike as its
only operating asset, Zondereinde.
PTM's share issue still leaves it short of the capital it needs in order
to complete the WBJV Project 1 (phases 1 and 2). To date some C$190m
has been invested in the WBJV out of a forecast C$506m.
In addition to furthering the development of the WBJV, the net proceeds
from the share issue would be used to fund the company’s 49% portion of
the Waterberg joint venture project as well as general working capital
“The offering is expected to close on or about December 31,
2013 and is subject to Platinum Group Metals receiving all necessary
regulatory approvals,” it said.
The last quarter of 2014 has been difficult for PTM. It declared itself
‘surprised’ that Africa Wide decided not to contribute its $21.6m
portion in WBJV, a development which logically implies it will have to
find a replacement for Africa Wide's remaining stake in the project.
Africa Wide is PTM's empowerment shareholder.
That may prove more difficult to achieve owing to a dispute between PTM
and the ultimate shareholder in Africa Wide, Wesziwe Platinum, on the
extent of dilution after Africa Wide decided not to follow its rights.
PTM has already said it was unlikely it would produce first concentrate
The delay in cash flow could have a cascading effect on the
company’s balance sheet.
PTM has even raised the prospect that it could delay further development
of the project going the way of compatriot Eastern Platinum which has
put its South African platinum projects into mothballs.