Emerging precious metals junior Platfields is putting on a brave face ahead of its planned JSE listing. It insists that now is the right time.
The company hopes to raise R200m to fund exploration, from selling shares into a market that has treated precious metals exploration brutally over the past six months. Illiquid conditions, falling metal prices and risk aversion have wiped out more than half the market value of JSE-listed platinum juniors, and the slide may not be over.
In July it was enough to stop the listing of another junior, Lesego Platinum, and that was when the metal was trading at US$1 757,50/oz - well above this week's levels of around $1 180. But Platfields CEO Bongani Mbindwane, who is a former head of administration in parliament, seems unfazed. He argues that listing while metal prices are so low will attract strong investor interest, as it offers significant upside potential.
RBC Capital Markets analyst Leon Esterhuizen disagrees. "You will find it incredibly difficult to list a junior at this time," he says, adding that it would be less painful if the company had some cash flow. But this will be missing from Platfields' books until about 2011, when it plans to start producing. "I don't think they are going to raise a lot," says Esterhuizen.
Platfields needs the cash to fund its exploration programme, particularly at its flagship Berg project, in the same neighbourhood as Northam Platinum's Booysendal project and Aquarius Platinum's Everest South.
The company still has R70m left in the bank from an earlier capital-raising, but will require more than R300m over 60 months. The Berg project is the most advanced project and it hopes to build an open-pit mine there. Platfields also owns 32,5% of the Leeuwkop property, on the western limb of the Bushveld Complex, and holds 100% of the Grootfonteinberg gold project next to Simmer & Jack's TGME mine, just outside Pilgrim's Rest.
Ultimately, the company aims to raise R450m in two phases on the JSE, pursuing a secondary listing in Toronto later.
Esterhuizen says liquidity and investor confidence will return to the platinum market only with much higher metal prices, but Mbindwane says retreating markets will make capital-raising easier: "What we are likely to see now is a correction upwards."
Esterhuizen argues that platinum prices won't begin to shine again overnight, and there will probably be a lull for a couple more months.
A possible reason for Platfields pressing ahead is that a predator is circling, and a listing would offer an easy exit strategy for its 1 600 shareholders. Mbindwane acknowledges this. "If one is listed, you offer the potential for business arrangements," he says. "There are always informal discussions taking place." However, he stresses that Platfields views itself more as predator than prey. "We want to operate - that is the key."
Both Aquarius and Northam deny any talks to acquire Platfields, or interest in doing so. Aquarius spokesman Nick Bias says it makes more sense to look at exploiting synergies with Booysendal, and Northam spokesman René Rautenbach says his company has got more than enough on its plate with Booysendal. Northam acquired that property earlier this year, in a deal that resulted in Mvelaphanda Resources getting a controlling stake in its shares.
Mbindwane confirms that the company will go ahead with the listing by the end of this year. "We are not going to pull this listing for any reason other than God's issues."
Bongani Mbindwane
Chief Executive
E-mail: bongani@platfields.co.za
© 2010 Platfields Limited | Disclaimer