Platinum’s future features in Corpcapital decision

SABLE Platinum recently announced it would be reverse-listing into New Corpcapital. The proposal is straightforward. New Corpcapital will consolidate the 379-million shares it has in issue, on a 10-for-one basis, which will leave about 38-million shares with a net asset value of about R1,20 a share. It will issue 180,3-million new shares to acquire 100% of Sable Platinum, putting a value of R216,4m on Sable. The new entity will have roughly 218,3-million shares in issue, providing current Sable shareholders with an 82% holding and the New Corpcapital shareholders with the other 18%.

Sable will then offer to buy back 50% of its shares at R1,20 a share. None of the current Sable shareholders will take up the offer, giving New Corpcapital shareholders the opportunity of taking back half the cash sitting in their company.

There are issues, in terms of tenure, on one of the Sable properties, consequently 20% of the new shares will go into escrow to be released only when that property comes to fruition.

This does create some uncertainty in terms of future earnings and shareholding, but New Corpcapital shareholders holding 62,24% of the issued shares have already approved the acquisition.

That means that the only decision left to the minority is whether to sell at R1,20 or take up shares in a junior miner that will start trading at R1,20 but, for now, will only have a tangible net asset value of 28,3c a share.

Why 28,3c a share? It’s not clear, except that this is the postacquisition figure given in the proforma statement released by New Corpcapital. Another explanation comes from James Allan, one of the founders of Sable Platinum, who has agreed to serve as CEO for a further five years, and who says it is “merely a book value given by the accountants”.

“… 28c a share is not the value to be looking at,” says Mr Allan, as “the true value of Sable lies in its assets and the mineral rights … Sable has five principle projects in its portfolio … we have conducted drilling on four of these properties, two of them have already intercepted platinum reefs and the grades on the reefs, the thickness of the reefs, (are) well in excess of the values that were estimated by the competent persons’ report. We are drilling on two of the other properties and we expect to intersect the reefs on those pretty much in the next couple of months. So, we have geological certainty … we also believe that in the next few years there will be a resurgence in the platinum price that will lead to an increased interest in our properties.

“As regards funding … we are currently seeing financial institutions and individuals both in SA and in New York and raising capital prior to the listing, so that there won’t be that dilution of shareholders immediately after the listing.”

Why the expected resurgence in platinum prices? “We think there is going to be a return to balance in the supply and demand relationship,” says Mr Allan. “We see the outlook for platinum in the autocatalyst industry to be very strong … there’s been strong growth in the demand for platinum in the production of Gorilla Glass … the glass that goes into every cellphone, iPad and flat-screen TV. There’s also the use of platinum in biomedical fields, albeit relatively small, but serving as a cancer drug. So there is growth in many areas and we think the present weakness will be shortlived and the long-term market for platinum is extremely positive.”

THOSE New Corpcapital shareholders who decide to sell but then don’t know what to with their cash may want to take a look at the type A and type B preference shares to be issued by VICI Private Equity Fund from the beginning of next month. “The Aclass preference share is a first of its kind in the South African market,” says Jaco Maree, the fund’s CEO, “in that it comes with a promissory note issued by Nedbank, providing capital protection.

“The fund is uniquely structured,” he goes on to say, “in that traditionally private equity investments are associated with higher risk. Whereas our fund will provide investors in the A-class preference shares with a secure capital investment for a 10-year period, while at the same time offering private equity-type returns.”

The minimum investment, however, is R20m. The other option, with a minimum investment of R1m, is the type-B preference share, which is not linked to a promissory note but will offer the same rate of return.

“We envisage returns of 7% in the first year,” says Hennie Smit, the fund’s chief investment officer, “and then expect to grow that in the second and third years to be in line with private equity returns in SA, which have offered returns of between 10% and 35%.”