Charlotte Mathews
6 July 2009
Johannesburg — SHARES in developing platinum processing company Braemore Resources plunged more than 30% on the JSE on Friday after junior miner Jubilee Platinum made an all-share offer for the company, valuing it at about £25,96m (R333m).
The offer is another move in the current consolidation in the sector, after platinum prices weakened and the rand strengthened against the dollar to levels that have squeezed the profit margins of all platinum miners. Developing miners are finding it particularly difficult to raise the capital they need. Other deals in the pipeline are Aquarius Platinum's merger with Ridge Mining and Ruuki's offer for Sylvania Resources.
Braemore corporate development executive David Russell said the share price drop was a knee- jerk reaction from investors taking a short-term view of the ratio of shares being offered by Jubilee for Braemore. Jubilee is offering one of its shares for 15,818 of Braemore's, which implies a discount rather than the premium entailed in most takeover bids.
AIM- and Johannesburg-listed Braemore is upgrading the scale of its test plant in Randburg, which uses new technology developed by Mintek to process platinum group metals containing high chrome in an economical and environmentally-friendly way. In May, Braemore signed an agreement to process Jubilee's concentrate from tailings.
Jubilee is working on a bankable feasibility study on the possibility of building a mine at Tjate that would be able to produce about 335000oz of platinum group metals (PGMs) a year for 20 years and has said it hoped to start construction on the mine this year.
Russell said there were several advantages to Jubilee's offer. Braemore had been searching for a platinum resource to meet its "mine to metals" strategy and had found it almost impossible because, despite the current downturn, companies still had an inflated idea of what their assets were worth.
At current PGM prices, margins for a small processor like Braemore were being squeezed and Braemore told the market in May that it needed to add refining capacity to improve margins, but would need additional finance.
Jubilee's offer includes funding Braemore's operating expenses up to R7m and making up to R25m available to settle some of its liabilities. Jubilee will also advance the R17m that Braemore is due to pay Mintek before September 30.
Russell said if it were not for Jubilee's offer, Braemore would have had to place shares to fund these commitments and the discount would have been considerably greater than that entailed in Jubilee's offer.
Braemore's board of directors is recommending Jubilee's offer and Jubilee has already secured acceptances from shareholders representing about 50% of Braemore's share capital. Russell said Braemore's major shareholder, Atomaer, with 44%, had indicated its support for the deal. Atomaer had also waived its right to 305- million performance shares for no consideration, which removed a substantial potential overhang over Braemore shares, he said.
Jubilee's offer is through a scheme of arrangement, which means once the conditions are fulfilled, Braemore would be delisted. If the offer does not garner sufficient support for a scheme of arrangement, Jubilee will make a substitute offer on the same terms.
Be the first to Write a Comment!
Copyright © 2009 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
