THE labour unrest disrupting platinum supply from SA, the world’s largest producer of the metal, is making it difficult for mining companies to raise capital for local projects, Pan African Resources CEO Jan Nelson said yesterday.
Pan African has raised the bulk of the R1.5bn needed to buy the Evander gold mine in Mpumalanga from Harmony Gold from domestic lenders and shareholders. The purchase of the mine is nearing completion and will boost the company’s cash flow and allow it to buy more assets.
"If we hadn’t raised the money in SA, we wouldn’t have got it overseas," Mr Nelson said in an interview with Business Day.
A London-based fund that held Pan African shares had recently informed him that SA was now deemed an "investor-unfriendly destination". The fund would no longer invest in the company despite its sound financial and operating performances.
Mr Nelson said he was getting similar feedback from Canadian and Australian financial institutions. The negativity followed the events at Lonmin’s Marikana mine, where a wildcat strike marred by intimidation and violence killed 44 people.
"This labour situation will break this industry if it is not dealt with. We have to do something because investor sentiment is bad. Really bad," Mr Nelson said.
Roger Baxter, a senior executive at the Chamber of Mines, said on Wednesday that foreign investors had to bear in mind it was just a small portion of the South African mining sector that was afflicted by the labour unrest. The chamber was working hard to ensure that it did not spread to other mineral sectors.
Mr Nelson said Pan African was awaiting clearance from regulators in London and Johannesburg before holding a shareholder vote on the Evander transaction. It would be funded through a R700m rights issue and underwritten by four key shareholders. Pan African had secured irrevocable support from the transaction from investors holding 51% of its shares. The major shareholders, including Coronation, Allan Gray and Investec, had closely scrutinised the Evander mine.
Evander’s profits have begun accruing to Pan African from the start of April.
Mr Nelson returned this week from a visit to potential Chinese investors, where concerns were raised about the stability of the workforce on the mines. "We are looking for strategic partners from China because we believe there are consolidation options coming," he said.
Pan African says it is a precious metals company rather than a gold miner because it has a platinum tailings treatment project.
Securing Evander will give Pan African about R800m a year in free cash flow when combined with its profitable Barberton gold mines.
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