Platinum Group Metals Ltd T.PTM

not even close--cmon jones sell ptm

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Wesizwe Platinum considers its options
 

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It's been five years and, after board upheavals, where will the money come from?
JOHANNESBURG - The singing, dancing, shouting people of the Bakubong Ba Ratheo tribe at the Wesizwe Platinumshareholders meeting in Sandton last week wanted one thing: assurance that a mine will go ahead.
"We have been dreaming of 3 500 jobs just as the Bafokeng have next door" said one referring to the neighbouring tribe's lucrative shares in Impala and Rustenburg.
Now that the dust has settled after the coup and counter-coup and the management team of Mike Solomon has been reinstated, bringing the mine to production is the next big challenge.
"It's one of the best projects in the industry", says Solomon, "It's shallow, only 650m deep, compared to 2 000m in the case of some of the biggest players in the industry. It's a thick reef with a great basket of 12 platinum group metals."
Future profitability will be largely a function, not only of the platinum price, but also the rand dollar exchange rate. The weaker the rand against the dollar, the better for Wesizwe.
But first Wesizwe needs a properly constituted board, a new top management structure, including a new CFO, reformed corporate governance with proper audit, remuneration, risk, finance and technical committees.
Then it needs a vast amount of funding - perhaps as much as $1bn. For a company with a present market cap of $150m, that seems a tall order.
Solomon is going to have to answer previous management's charges of lapses of corporate governance and his personal abuse of the company credit card. He will have to respond point by point to the report by Deloitte commissioned by the usurpers.
"There's a lot to do in the New Year. We need to clean up the blood on the floor, to install a competent board that satisfies shareholders - and a new CFO. Then we need to find a knock-out deal."
"The four options are: to sell, to hibernate until platinum prices and capital markets recover, to develop the mine ourselves, to find strategic partners, or a mix of these. In the end, the shareholders will decide."
Solomon dismisses the sale option now at the bottom of the market.
"A firesale will not generate shareholder value. For Wesizwe to develop the mine alone will be difficult because of the low share price and depressed capital markets." 
"The mine does not generate cash. Still, we have some cash but we'll move slowly."
"One option is to build the mine piecemeal as finance permits. The project is oven ready. There is already a bankable feasibility study and a mine design. Once we have built the shafts and there is a headgear, investors will take it more seriously."
Solomon estimates R2bn is needed to get the project to that stage.
One of the problems is that the shareholding tribe is divided into at least three factions. There is the tribal council, the royal family and a shareholder group called Africa Wide.
While these shareholders with perhaps 40% of the equity are divided and squabbling in and out of court, it is hard to imagine where the money might come from.
We can certainly expect legal challenges in the next few months from the losers at last week's extraordinary general meeting. One of the resolutions at the meeting was to find another representative of the tribal council. That might be difficult but Solomon wants to stage a round table discussion with the various factions.
This fractiousness has cost the company's credibility dearly. The share has slumped to R2 from more normal levels of R5 to R6 and from a top-of-the-market R15.
Solomon has been courting local and foreign strategic partners for some time. One Chinese group has expressed very real interest. Anglo Platinum with a property right next door to Wesizwe's prospect has bought in through the Delta Project. The idea is a swop of 37% of Anglo Plat's mine for 26% of Wesizwe.
One of the reasons for Solomon's extraordinary credit card bills in the past three years is that he has been courting capital providers in Japan and China for some years. He says at least one Chinese group is seriously interested in a direct investment in the mine.
"Foreign investors are in a different situation. They are more concerned with ore reserve replacement than with immediate profits. As marginal operations have closed and new capex has been deferred across the industry, supply tensions will emerge. As the market recovers through to 2012, we would look for a partner with a balance sheet and access to capital markets."
Acrimony between the various factions of the Bakubong led to shouting and some fears of violence at the AGM. A number of other BEE mining companies have been embroiled in internecine fighting. Does this mean there is more social risk in BEE mines?
Solomon thinks not.
"While a lot of heat was generated, the parties went away peaceably. They accepted the outcome even though not all of them were happy with it."
Still, protracted court battles will be a major deterrent to funding partners and could well prevent the dream of 3 500 jobs in the depressed North Western Province of South Africa.