RUSTENBURG, South Africa – You are right to wonder why, after four months of hearing the same “strategic” wrap from Platinum Group Metals’ CEO, I am still an owner of the shares.
In late January, R. Michael Jones gave me arefresher course on South Africa’s platinum prospects. (Please see photos here – by Thom Calandra.) I was visiting Platinum Group Metals’ Western Bushveld Joint Venture, and the small company’s team of geologists, mappers and financial strategists were huddled in a cottage.
The prospect of a working platinum mine in a platinum-rich region hinges on money to build the mine. We see that with China’s capital “rescue” of Wesizwe Platinum. Wesizwe this week opted for a consumptive transaction with the Chinese, thus relinquishing control of its mine project and the 
company.
Here is the lay of the land in bush country:
- Mr. Jones’ project, or anyone’s South Africa platinum mine for that matter, lay prone across the prairie to choppy prices for hot-white platinum. The element is used in jewelry and in anti-pollution devices.
- Getting a mine built these days also hinges on what other companies are doing in and around the Bushveld Complex. And by that, I do not mean preparing for World Cup games next month at the area’s new soccer stadium.
- Also on the tough-platinum-love list: the relatively strong rand currency, which boosts mine expenses listed on a Canada company’s statement of financial operations.
Platinum Group Metals (AMEX: PLG, Stock Forum) and (TSX: T.PTM, Stock Forum) has a link to this week’s headliner, Wesizwe. The Jo’burg company is a South Africa prospector that owns 26 percent of Mr. Jones’ Western Bushveld Joint Venture. Wesizwe until this week had its 350,000-ounce-per-year Frischgewaagd-Ledig project on hold. No cash.
Back there in January, on an unseasonably cool and rainy South Africa summer day, Mr. Jones was telling a small group of us – a few bankers, brokerage analysts and me – that he had many balls in the air. When they dropped, one of the balls would bobble into a capital solution for Platinum Group Metals’ longstanding project, formally titled Project 1. “We’re weeks away from choosing a strategic alternative,” he said.
I told our Ticker Trax™ audience that “Platinum Group Metals’ Western Bushveld Joint Venture … is about to experience a massive re-evaluation in financial markets. All because Mr. Jones, who is no stranger to the power of prose, stuck with the high-grade platinum prospect through thin and thinner.” I added, “I know because I have followed Mike Jones’s stewardship of the South Africa project since at least 2003.”
After those words, and the visit, I went out and bought about 40,000 shares of Platinum Group Metals. Mr. Jones talks the talk as well as anyone. Even as well as his Bushveld neighbor, Robert M. Friedland, whose private Ivanhoe Nickel & Platinum also has designs on platinum-group mining in the region (and gold and copper mining elsewhere in Africa).
Mr. Jones’ stock, traded in the USA and Canada (PLG and PTM), proceeded to rise after my January 2010 visit. Platinum Group Metals’ stock rose as high as $2.80 or so Canadian from $1.80 or so. I sold not a share, and I recently bought more before the stock got clocked back to $1.90 or so. It now resides at $2.20 a share.
The headline: Shudder
This week, Mr. Jones’ team in Canada transmitted what it said was related media coverage. The headline: Jinchuan, Chinese Fund, to Invest in South African Platinum Miner Wesizwe.
I wondered, even with the link to Wesizwe, how this China purchase was relevant to Platinum Group Metals. To me, it seemed as if Wesizwe had jumped ahead of Mr. Jones in the timeline to an operating platinum mine.
The vast Jinchuan Group and China-Africa Development Fund are buying 51 percent of Wesizwe (WEZ on the JSE) for $227 million. The three entities will use $650 million of financing from China Development Bank to build that proposed mine. (The boilerplate for Mr. Jones’ Project 1 and Project 3 Mines is this: Platinum Group holds rights for up to 74 percent of 8.2 million ounces (four-element equivalent of platinum, palladium, rhodium and gold) in measured and indicated categories in Project 1 and 1.9 million 4-element ounces inferred in Project 3. Reserves for Project 1 stand at 4.67 million ounces four-element equivalent.)
I called Mr. Jones at his office in Vancouver, Canada. As a researcher and a shareholder. He told me Platinum Group Metals will not “give away” control of its proposed mine to the Chinese … or anyone for that matter. “Wesizwe,” he says, “had no choice due to the $900 million required to build the project.”
Oh, the CEO added, and I shudder, that his company is just weeks away from “moving things forward.”
I shuddered in 2008 when the price for platinum rose as high as $2,250 an ounce. I thought then that the “precious” metal I consider the world’s most valuable, most beautiful and most utilitarian surely was ready to pave the way for the “stock-market” unveiling of Ivanhoe Nickel & Mines, whose private shares we at home have owned for seven years.
Platinum’s $1,500 an ounce still leaves us hopeful here at home. Besides, I love the metal and even bought some platinum commemorative South Africa coins in Jo’burg earlier this year.
R. Michael Jones tells me this week, “Why would not Jinchuan come for us first? Well our shareholders would not go for this. Our capital costs are about half of Wesizwe. We would not give up 51 percent for accessing capital.”
The Chinese love platinum jewelry as much as our parents and grandparents did when they got engaged and married. (I’m 53 years old.) Jinchuan also runs ones of the largest nickel mines in the world, north of Beijing. Mr. Jones says, “They know the PGM (platinum group metals) business. And we are up-dip of them.”
He adds, and I shudder again, “In the next few weeks we will make a strategic decision. You have seen a strategic decision from China. I think when we make our own strategic decision here in the next few weeks, the world will view our company very differently.”
Were this to happen, and yes, I believe Mr. Jones and his financial team are ankle-deep in paper, or juggling those financing balls as they consider the options, then Mr. Jones’ pushy prose, and my own written material for that matter, would enter the carnival of the possible.
Allow me to end this free report with the words we sent to our Ticker Trax subscribers in February:
Mr. Jones’ 74 percent-owned platinum project on the western limb of these gorgeous rolling hills in and around the town of Rustenburg is, as we know now, yea close (imagine two fingers millimeters apart) to construction stage. I can say that because I have seen it, just now.
“We have about eight balls in the air right now when it comes to the financing of this project,” Mr. Jones tells a small group of metals analysts at the farmhouse that houses Platinum Group Metals’ HQ. Those balls will start dropping from the sky in two or fewer weeks, when the final government ink is splashed across closing-of-title for the property, the serial entrepreneur says.
This part of the world, the Bushveld Complex, holds some 70 percent or more of all the world’s platinum. The Chinese as jewelry consumers are loving platinum, and some of us know how important platinum is to catalytic converters and other automobile users. Platinum also is becoming a currency for those of wealth who no longer desire paper in their portfolios. (Copper, gold and silver also are in that mix.)
Please see our Ticker Trax™ password-protected library for more about Mr. Jones and his up-dip company. Also this week: a Colombia speculative notion.
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(All photos by Thom Calandra. Thom and his family own shares of each of the 12 Planetary Prospects. Thom’s personal holdings are available for all to see on Stockhouse, the Canada publishing company. Subscribers are informed well in advance of any shift in research regarding Planetary Prospects and any purchase or sales decisions. Subscribers always come first.)
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THOM CALANDRA of Ticker Trax helps his audience find value in a quagmire of investment choices. Thom co-founded CBS MarketWatch and MarketWatch.com. As the voice of Thom Calandra's StockWatch and The Calandra Report, Thom pegged $300-ounce gold as a long-term hold in 1999 and in 2000. He has been covering life-sciences and natural resources since 1988.
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