Embattled platinum miner Platinum Australia was in merger discussions with fellow South African miner Jubilee Platinum regarding a possible merger.
Under the proposed merger, Jubilee would acquire all the ordinary shares on issue in Platinum Australia in a share exchange.
The parties have now executed a heads of agreement outlining the key elements of the proposed transaction, which would be used to guide the preparation of binding transaction documents, which were in the process of being negotiated.
In a joint statement, Jubilee and Platinum Australia said that the merged entity, which had the potential to create a top 5 platinum producer in the world, would be seeking a financing package for project finance, working capital and for the partial settlement of Platinum Australia’s debts.
The financing package was currently being negotiated.
Under the proposed transaction, the Smokey Hills mine, which was fully capitalized and ready for production, would be reopened to provide the combined group with significant platinum group metal product.
It was expected that the mine would be brought into production during the second half of 2013.
Furthermore, Jubilee recently concluded an agreement with Platinum Australia for the toll processing of Dilokong chrome mine platinum-bearing tailings using the concentrator at the Smokey Hills operation. The agreement accelerated the processing of Dilokong tailings by some 14 months, to start during the first half of 2013.
The two companies said on Monday that the combined group would have access to the ConRoast process for its future concentrate production, and with the exception of the Tjate platinum projects, the other projects in the combined group were near-term, with relatively low capital requirements.
“We believe that Jubilee’s diverse platinum portfolio and cash flow potential, together with our Smokey Hills mine and development projects, will result in a balanced group well able to take the benefits of the anticipated improvement in the fortunes of the platinum industry,” said Platinum Australia director John Lewins.
Jubilee’s CEO Leon Coetzer added that the proposed transaction would materially enhance Jubilee’s mine-to-metals strategy, and added that the company was looking forward to developing the respective assets in best interest of shareholders.
It was believed that the development of Platinum Australia’s openpit Rooderand project would complement the Smokey Hills mine, and a mining right application was submitted for the project late in 2012, with a definitive feasibility study due for completion shortly.
The group would also look to develop Platinum Australia’s openpit Kalahari platinum project, on which a mining right application would likely be submitted in the first half of 2013.
Edited by: Creamer Media Reporter