Jubilee Platinum (LON:JLP) is moving to control its own destiny following protracted and as yet unsuccessful negotiations to acquire Platinum Australia, which owns the mine and processing facilities next to its Dilokong tailing project in South Africa.
Chief executive Leon Coetzer told Proactive Investors the company is looking at alternative ways of processing the platinum group metals from the chrome mine, in South Africa’s eastern Bushveld.
Jubilee planned to treat tailings using PLA’s Smokey Hills processing plant, before then restarting mining there.
There is significant spare capacity nearby, while longer Jubilee might even consider building its own facility.
The tie-up as planned would have worked for both sides, providing Jubilee with significant synergies and savings while offering PLA’s creditors a way to realise value for the asset.
However as the debt accrued by PLA has risen over recent months, so the combination has looked less and less attractive for Jubilee investors. And this has led to a stalemate with PLA’s main creditor.
“[The debt] has reached a level where it threatens the value of the transaction,” Coetzer told Proactive.
“When one looks at the combination of assets most people recognise they are enormously complementary.
“The debt compared to where it was initially has increased a significant amount.
“We can’t afford to end up having the funds raised to restart the operations being utilised to repay a creditor and not being used to start a mine.
“We are hoping, trusting and have to believe that sense will prevail.”
The PLA acquisition aside, Thursday’s operations update contained some nuggets of encouraging news.
Revenues, gross profits and cash flows from the company’s Middelburg smelter and power operation continued to grow. It means Jubilee is expected to make a net profit in the next quarter, which is a major milestone.
Prospects will be enhanced by the commissioning of the third arc furnace, which is expected to occur in March.
At the same time it is hoped there will be some movement in the sale of Quartzhill Farm portion of its Tjate Platinum Project.
The deal will bring in £4.2mln, or the equivalent of 60% of Jubilee’s current market capitalisation.
However it requires the sign-off of the Department of Mineral Resources (DMR).
If all the bits fit into the place, then Jubilee becomes a “unique and strong little company”, the CEO reckons.
“The share price we think has lost all relationship to the asset value. Just looking at the Quartzhill, a property that hasn’t even been drilled, and the valuation, you can see just how disjointed things have become.”
The shares, down 85% in the last year, value the group at just under £7mln.