Ed Stoddard

Junior platinum firm Wesizwe, which is building a mine in the North West backed by Chinese money, has its “ear to the ground” for a fire sale of assets that could result from the massive industry strike.

“We would definitely look at assets and would not look a gift horse in the mouth. We’re keeping our ear close to the ground,” chief operating officer Paul Smith said. 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 if it did have a look at assets being put on the block, it would turn to its Chinese shareholders for funds.

Anglo American has signalled it planned to restructure its ailing platinum unit in South Africa, with the sale of its underperforming Rustenburg mines seen likely.

Smith said Wesizwe was restricted in terms of what it could do as its current financial commitments were going into the construction of Bakubung. Wesizwe’s main strategic shareholders are 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 marks a new chapter in the Asian giant’s scramble for resources on the continent.

Platinum is primarily used for catalytic converters in car engines and for jewellery. Demand is soaring in China as its car production increases and the burgeoning middle class demands more luxury items.

The Chinese Development Bank has provided a $650 million (R6.8 billion) loan for Wesizwe’s mine project – at the London interbank offered rate 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 signalled an intention to snap up South African platinum assets, Sibanye Gold, has Chinese investment partners.

Smith cautioned that talk of sales was premature, not least because it was a buyer’s market.

Platinum’s spot price has been depressed amid low demand and has been little moved by the Rustenburg strike that has hit 40 percent of global production because stocks have been perceived to be adequate. That may change if the stoppage continues. – Reuters