Finweek English Edition - - INSIGHT - David Mckay

For all its ills lately, SA’s plat­inum sec­tor con­tin­ues to at­tract in­vest­ment as ev­i­denced by two list­ings in the past two months. Last week, Sable Plat­inum re­verselisted into cash shell New Cor­p­cap­i­tal, while a month ear­lier, on the Toronto Stock Ex­change, the ex­tra­or­di­nary whirl­wind of spin and hy­per­bole that is Robert Fried­land, brought the long-awaited Ivan­Plats into be­ing. In many respects, how­ever, you couldn’t get two more dif­fer­ent de­buts.

In the global min­ing world, Fried­land is leg­endary. In the late Nineties, he fa­mously sold the Voisey’s Bay nickel de­posit in Canada to Inco for $3.1bn.

More re­cently, he cham­pi­oned the devel­op­ment of a cop­per and gold prospect in Mon­go­lia through a com­pany called Ivan­hoe Mines. It set out at a time when Mon­go­lia’s vast coal and other min­er­als were not c on­sid­ered pr i me ex­plo­ration fod­der. Ear­lier this year, Rio Tinto com­pleted the $16bn takeover of

Ivan­hoe Mines.

One can only sup­pose Fried­land’s eye for to­mor­row’s “gold rush” re­mains in­tact be­cause Ivan­Plats not only bases its in­vest­ment case on SA’s be­lea­guered plat­inum busi­ness, but also on cop­per and zinc ex­plo­ration prop­er­ties in the Congo where rebel forces are cut­ting a wide swathe through the coun­try’s north­ern reaches. Some­one be­lieves him. Ivan­Plats raised just over C$307m in cash in Toronto, tak­ing over­all eq­uity raised above C$500m for the prospects. The pub­lic of­fer­ing has pro­vided rare tak­ings for in­vest­ment banks and, in the es­ti­ma­tion of PwC, con­sti­tutes a lit­mus test for a re­vival of min­ing list­ings in Toronto.

Says Fried­land: “We f irmly be­lieve that the Fla­treef dis­cov­ery will prove to be trans­for­ma­tive for the plat­inum min­ing in­dus­try”. “Fla­treef ”, as Fried­land terms it, is sit­u­ated in the North­ern limb of the Bushveld, about 280km north­east of Jo­han­nes­burg, lo­cated near to An­glo Amer­i­can Plat­inum’s Mo­galak­wena prop­erty.

Ac­cord­ing to one con­sult­ing en­gi­neer, the “Fla­treef ” is ex­tremely low-grade and re­lies on high vol­umes and by-prod­uct cred­its from min­ing other min­er­als with it, such as nickel. Wor­ry­ingly, Fried­land says it’s given to mech­a­ni­sa­tion – a type of min­ing that is thought to be the root cause of Lon­min’s min­ing prob­lems when adopted by pre­vi­ous CEO, Brad Mills.

Ex­plo­ration stocks are nearly al­ways a slow burner; the ges­ta­tion pe­riod is ex­tremely long in some cases. SA’s an­swer to Robert Fried­land, the colour­ful fig­ure of Rob Still, most re­cently the former chair­man of Metorex, makes the sober­ing ob­ser­va­tion that min­ing ini­tial pub­lic of­fer­ings (IPOs) need han­dling with care.

Pre­sent­ing at a re­cent con­fer­ence in Jo­han­nes­burg, Still showed IPO cap­i­tal fell to $2bn in 2011 from $8bn in 2010, and will be lower this year. In ad­di­tion, 80% of 2011’s IPOs are now trad­ing be­low their list­ing price. Some­thing to think about.

James Al­lan, CEO of the newly listed Sable Plat­inum, says Fried­land’s mar­ket­ing has pro­vided ex­tra lift to the plat­inum ex­plo­ration space. Sable is a dif­fer­ent propo­si­tion, how­ever. The style is more con­ser­va­tive cer­tainly, but no less re­spected with ex­pert plat­inum an­a­lyst René Hochre­iter tak­ing up the role of tech­ni­cal di­rec­tor.

Sable has f ive projects on the west­ern side of the Bushveld, which Al­lan be­lieves is the best ad­dress for new plat­inum pro­duc­tion. Some prop­er­ties are held in joint ven­ture with ex­ist­ing com­pa­nies with over­all re­sources es­ti­mated at 70m oz. “The plat­inum mar­ket has bot­tomed,” says Al­lan. “This is the right time to list.”

Al­lan is hop­ing for a more mod­est cap­i­tal raiser than achieved by Ivan­Plats of some $ 30m but says i nvest­ment de­mand among in­sti­tu­tions has been good, although some­what stunted in the UK.

At R1.05/share, the busi­ness is val­ued at just un­der R40m on the JSE against the R203.5m im­plied by the com­pany’s cal­cu­la­tion of net as­set value.



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