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Msg  8685 of 8689  at  12/11/2013 2:04:25 PM  by


PTM in $164m issue as waits on debt

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 announcement.
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 purposes.
“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 in mid-2015.
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. 

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