Thursday, January 24, 2013

The strange battle for Nkwe Platinum

Wesizwe Platinum chief executive Jankie Gao.(Gallo)
Anglo American's CEO Cynthia Carroll blames apartheid legacy for turmoil at South African mines. (Gallo) 23 JAN 2013 20:11 - PHILLIP DE WET Platinum is anything but hot right now, but one empowerment group has seen a shareholder revolt around the control of a potential mine in Rustenburg. SPECIAL FOCUS Marikana: Platinum mines in chaos OUR COVERAGE Platinum sales reach lowest levels in over a decade MORE COVERAGE China loans $650-million to Wesizwe Platinum Platinum price surges on potential supply deficit ANC to call for curb on platinum, iron ore exports The platinum sector is in the doldrums; depressed prices, labour trouble, and threats from government to seize the rights to mines that are mothballed. None of these factors add up to an attractive investment but there are enough platinum bulls around, so much so that the control of one potential Rustenburg mine – with rich but risky prospects – has turned into something of a a battleground. A minority shareholder in a local black empowerment vehicle this week nearly went to court, and might still file for an interdict, to stop a deal involving a Hong Kong investment entity registered in Cyprus and an Australia-listed company nominally headquartered in Bermuda. At the end of the tangle of companies is a potential platinum mine in Rustenburg, the same area in which Anglo Platinum has indicated it could close and sell shafts, at the cost of as many as 14 000 jobs. The mine does not yet exist and would be able to go into production by no earlier than 2015. It also faces a potential legal overhang, a dispute about rights and licences. Yet different parties are jockeying to control it, complete with allegations of dirty tactics and underhanded dealing. "They know this project is worth almost a hundred million ounces, that we’ll be mining there for the next 60 years, and it’s not too deep,” said Andile Nkuhlu. “There are obscene profits there, over time.” Nkuhlu is the minority shareholder threatening legal action to undo a deal that would, he argued, see a change of control in black empowerment holding company Genorah. Genorah, in turn, owns 60% of Nkwe Platinum, a development company listed on Australia’s ASX. Financial trouble Thanks in part to the recent turn in the platinum market, Genorah and Nkwe are in financial trouble, with a cash crunch insiders said was dire. The company’s inability to repay a loan saw the lender start to sell off shares in lieu of payment last year, which lead it to hastily arrange a different facility. What Nkwe and Genorah hold, though, is a feasibility study that shows a potential profit margin of nearly 56% on a project called Garatau. The project would cost more than R5-billion in funding, Nkwe told its shareholders in the last quarter of 2012, but that would be paid back within 10 years, after which the project should yield upwards of R157-million per year in pure profit. In order to get there, Genorah and Nkwe need a little cash in the short term, and a lot of cash in the long run. One potential funder is Mvelaphanda, the group created by Tokyo Sexwale. “We are positive towards the South African mining sector, and can therefore confirm that we did engage to start a due diligence process to recapitalise the Genorah structure,” Mvelaphanda’s Mark Willcox said this week. “We believe that some of the legal challenges there have been settled.” At least one other group, based in China, also expressed interest in funding Nkwe. But instead of either of those, the company’s executive directors concluded a deal with investment fund African Minerals Exploration and Development (Amed). The deal was struck with what appears to have been extreme haste, over the December period, and at terms Nkuhlu described as unpalatable. Which is why he, and other shareholders holding a total of 26.5% in Genorah, threw spanners in the works. Bargain price In court papers prepared by the minority shareholders, they argued that Amed outmanoeuvred Genorah entirely, creating a situation where the fund would effectively take control of Genorah (and, through it, Nkwe), for the grand total of $4.5-million – plus nothing more but the promise of further funding. They also argued that bargain price was arrived at through an irregular process – they stop not quite short of alleging fraud. If it is allowed to proceed, Nkuhlu said, it would be disaster. “It creates this perception that Nkwe will receive cash, but it is structured so that Amed doesn’t have to give up that cash; the conditions are too onerous. It will deny Nkwe access to the capital markets to raise money. That could stop the entire project.” Nkuhlu – a former ANC Youth League leader, who has held various positions within the ANC and survived campaigning for Thabo Mbeki in 2007 – also saw a political dimension. “Giving this for some small change to a foreign fund” when platinum was already considered a strategic resource, he said, would not help when it came to facing regulators. Nkwe managing director Maredi Mphahlele this week largely dismissed the concerns and actions of the minorities. "It is not an issue of control as is being spun,” he said. “There are obviously people who are unhappy, [but the deal] is not under threat." In fact, he said, it was effectively done, and shareholders would be informed about the terms of the recapitalisation – which “has been misunderstood” – through normal company announcement processes. Mvelaphanda’s Willcox stressed that his company had no part in the dispute, and maintained equally good relations with all Genorah shareholders. Would it still be interested in a deal? “Perhaps.” Others too were watching the dispute, and would possibly be parted from their money at the right price. “The problem with the platinum mines you have now is that they cost money to mothball and keep on care and maintenance,” said an industry insider. “This project we’re talking about is very rich, but right now it is not costing you any money. By the time it starts producing, the demand for platinum will be back. Smart people buy when the market is down.” Mail & Guardian China loans $650-million to Wesizwe Platinum 22 JAN 2013 09:01 - REUTERS South African platinum producer Wesizwe Platinum says it has received a $650-million loan from the China Development Bank for its Bakubung project. OUR COVERAGE Platinum sales reach lowest levels in over a decade Platinum miners want Anglo American to dig deeper MORE COVERAGE Platinum price surges on potential supply deficit ANC to call for curb on platinum, iron ore exports The loan comes against the backdrop of an expected increase in platinum demand from China and as major mining companies such as Anglo American move to close shafts as soaring costs make the industry in South Africa less and less viable. Platinum is used to make emissions-capping catalytic converters in cars and in jewellery, which is in growing demand among China's burgeoning middle classes. "Main commissioning of the mine is scheduled for 2018 and full production is anticipated in 2023," the company said in a statement, adding that the project was "progressing well and remains on budget". The planned mine is near Rustenburg, where Anglo unit Anglo American Platinum last week unveiled plans to close two mines and cut up to 14 000 jobs in a bid to restore profits. South Africa sits on top of 80% of the world's known platinum reserves but labour, power and other operational costs have risen much faster than the white metal's price over the past decade, squeezing margins. – Reuters Mail & Guardian Platinum price surges on potential supply deficit 16 JAN 2013 11:39 - ANDRIES MAHLANGU The platinum spot price has increased to a three-month high pushing the JSE platinum stock index to a nine-month high amid potential supply limits. OUR COVERAGE Amplats plans to close shafts, sell mine to cut costs MORE COVERAGE Workers protest Amplats's retrenchment plans Minister shocked by Amplats's 14 000 job cuts Amplats likely to sell or shut Union mine Anglo American Platinum recently announced it was putting four shafts at its Rustenburg complex onto care and maintenance. Amplats‚ the world's largest producer of the metal‚ has also earmarked its Union mine for sale in a move to restructure the business‚ affecting about 14 000 jobs. "The review of Amplats' operations means there will be less platinum in the market than before. The market is pricing in potential supply constraints with other big players likely to follow in the Amplats footsteps‚" said Rob Towell‚ senior equities trader at Consilium Securities. Overnight workers at Amplat refused to go underground to protest the company plans to close mines. Mineral Resources Minister Susan Shabangu said on Tuesday the retrenchment plans by the company came as a shock to the government. Horse has bolted "It is regrettable that the company consulted with [my] department less than seven days ago, despite the major socioeconomic ramifications of its decision," she told reporters in Pretoria on Tuesday. "We are surprised and shocked ... " Shabangu said Anglo American approached her department last year to say it was facing problems and considering restructuring. She said the company was told to discuss any such plans with the department first. Yet, the company waited until seven days ago to do so. Shabangu asked if this was a sign of new company management. "When the horse has bolted, then they come to us," she said. At 11.26am‚ the platinum spot price was up 2.67% to US$1 695‚ the highest level since October last year‚ while platinum index rallied 2.16%‚ well above all share gains of 0.12%. – I-Net Bridge MAIL & GUARDIAN Carroll: Mine violence caused by legacy of apartheid 05 DEC 2012 06:35 - SAPA Violence witnessed in the mining sector this year stems from "underlying social problems that remain", says Anglo American's CEO Cynthia Carroll. OUR COVERAGE Marikana: Footage shows miners in state of panic Mine unrest comes home to roost MORE COVERAGE Marikana families blame deaths on police, Lonmin Work at Gold Fields resumes, but mine strikes not over yet "The violence we have seen in the mining sector this year has its seeds in the legacy of apartheid and the underlying social problems that remain," the mining company's outgoing chief executive said during a discussion at the Gordon Institute of Business Science in Johannesburg on Tuesday. "The curse of unemployment means that mine workers often have many other people who are economically dependent on them." Carroll said the history of the migrant labour system loosened the bonds of family life and dislocated communities. "The brutalisation of human relationships that occurred under apartheid ... all of these factors can be seen in the turmoil and tragedy we have experienced this year." Carroll said whatever the challenges the country faced, there were "truths" which had to be faced. The first was that there was no future for any society without law and order. Maintaining law and order "Public order is the bedrock without which civilisation collapses. This year we have seen violence and unrest across the mining industry and in several other sectors." Another truth the nation had to face was that anarchy in the workplace benefited no one. Businesses that could not generate adequate returns ultimately collapsed and died. "It is the responsibility of management, not just to shareholders, but also to employees, to ensure that companies remain economically competitive." The maintenance of law and order and the restoration of stable labour relations were critical to perceptions of South Africa as a place to do business. "They [international investors] will make their judgements on the basis of the reality they can see." 'Mining is at the heart of SA economy' She said the mining sector was at the heart of the South African economy, generating 18.7% of the country's GDP and directly employing 13.5-million people. "It [mining] has a critical role to play in supporting the aspirations of the new growth path and the objectives of the national development plan." Carroll said discussions on the regulation of the mining sector had been going on for a long time. "The spectre of nationalisation has been laid to rest. But the need to guard against damaging regulatory changes remains." – Sapa MAIL & GUARDIAN - - - - COMMENTS BY SONNY - - This adverse publicity will send the price of Platinum sky rocketing. When the price is right the mining houses will reopen their mines. This is a super Capitalist ploy to increase prices. Tokyo Sexwale will reappear on the mining scene now that Ramaphosa is forced to withdraw due to his ANC NEC appointments. Sexwale is certain to be axed by Zuma in the near future. Mvelaphanda’s Mark Willcox, who has been Sexwale's spin doctor since 1994, will merge with the Chinese investors Jankie Gao and partners in Africa. MONEY WILL STILL BE MADE FROM THE SALES OF PLATINUM IN SA. Cynthia Carroll should not blame the legacy of Apartheid for her being placed on the "Non-Performer List of 2012!" THE OPPENHEIMER'S BECAME "SOCIETY FAT CATZ" BEFORE, DURING AND AFTER APARTHEID!

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