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PLATINUMWEEK-Chinese-backed Wesizwe says may look at other platinum assets
May 20, 2014 / 3:47 PM / 4 years ago

PLATINUMWEEK-Chinese-backed Wesizwe says may look at other platinum assets

* Restructuring seen after big strike
    * Chinese investors seen keen on platinum assets
    * Buyers' market for S.Africa platinum mines

    By Ed Stoddard
    JOHANNESBURG, May 20 (Reuters) - South African platinum firm
Wesizwe, which is building a mine backed by Chinese
money, has its "ear to the ground" for a fire sale of assets
that could result from a massive industry strike.
    "We would definitely look at assets and would not look a
gift horse in the mouth. We are keeping our ear very close to
the ground," Paul Smith, the chief operating officer of the
junior platinum group, told Reuters in an interview.
    He stressed nothing was definite and that Wesizwe remained
focused on building its flagship Bakubung mine, which aims to
start extracting platinum in 2018 and hit full production of
around 420,000 ounces annually two years later. 
    But Smith said Wesizwe was "acutely aware of what is going
on around us" and that if it did have a look at assets being put
on the block, it would turn to its Chinese shareholders.
    Mining group Anglo American has signaled it plans to
restructure its ailing platinum unit in South Africa, with the
sale of its underperforming Rustenburg mines seen likely.
    Anglo American Platinum, the world's top producer
of the precious metal, and rivals Impala Platinum and
Lonmin are in the throes of a 17-week strike in South
Africa that has cost the trio collectively almost $2 billion in
lost revenue and has been turning violent. 
    Restructuring and a fire-sale of mines seems almost a
certainty when the crippling strike, which Lonmin's chief
executive said on Monday was "bleeding" the company, ends.
    "I cannot say anything definitive but we are not head in the
sand in terms of just building our own mine. But we are clearly
not going to rush into anything blindly," Smith said.
    Smith said Wesizwe was restricted in terms of what it could
do as its current financial commitments were going into the
construction of Bakubung.
    "So one would then look at the strategic shareholders and
that is really where decisions would be made," he said.
    Wesizwe's main strategic shareholders are comprised of a
Chinese consortium headed by mining giant Jinchuan, which has a
45 percent stake in the group.
    This represents the first direct Chinese thrust into
platinum production in Africa and as such marks a new chapter in
the Asian giant's scramble for resources on the continent.
    Platinum is primarily used for catalytic converters in motor
engines and for jewellery. Demand for both is seen soaring in
the long run in China as its car production increases and its
burgeoning middle class demands more luxury items.
   The Chinese Development Bank has provided a $650 million loan
for Wesizwe's mine project - at Libor plus 350 basis points,
which in dollar terms would be around 4 percent, far less than
what South African companies would normally expect to pay.
    The one company that has strongly signaled an intention to
snap up South African platinum assets, Sibanye Gold,
also has Chinese investment partners. 
    But Smith also cautioned that talk of sales was premature,
not least because it clearly is a buyer's market at the moment.
    "For a big producer it's fundamentally the wrong time to
sell. You are sitting on the bottom of the cycle. You can't go
down further. You've got a metal price that's flat on its back,"
he said.
    Platinum's spot price has been depressed amid low
demand and has been little moved by the South African strike -
despite the fact that it has hit 40 percent of global production
- because stocks have been perceived to be adequate. That
thinking may soon change if the stoppage continues.
   "You've got your operations shut down because you have a
massive strike...To go and sell now, you're going to get nothing
for it," Smith said.           

 (Editing by Susan Thomas)

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