CAPE TOWN-based platinum exploration group, Platfields, appears to have reached a critical juncture.
Last month the JSE suspended trade in the company’s shares after directors failed to publish annual statements for the year to end February 2013. Platfields, which was founded in 2002, is well known amongst Cape Town investors – many of who funded the group in its early days before it listed on the JSE in 2010.
In the last report to shareholders – covering the half-year to end August 2012 - CEO Bongani Mbindwane, noted that Platfields exploration activity had largely been on care and maintenance. He said turbulence in the South African mining industry, particularly in the platinum sector, had a negative effect on attracting investments in junior miners. But he indicated Platfields was continuing to investigate various potential business arrangements – which possibly explain why the company has been trading under a cautionary notice for some time.
The big issue for Platfields is liquidity. Exploration is a cash burning exercise, and the company already showed a R7,2m loss for the past interim period after impairing one of its exploration projects. Platfields problem is plain to see in the last interim results. The company’s cash balance has been whittled down to just R2,6m – which is hardly a reassuring considering operating expenditure for the six months was close to R4m.
In essence, Platfields has two difficult choices:
- Sell off one of its projects; or
- Find a new investor with deep pockets.
Platfields values its exploration assets at R55m, which is key to any effort to recapitalise the company. Interestingly when Platfields was suspended on the JSE, the company carried a market value of just R15m.
At last count, Platfields indicated it was raising capital to complete its exploration programme on the Leeuwkop Project. With the Marikana mine disaster and the low demand scenario still dogging sentiment in the platinum sector, CBN would imagine Platfields is not exactly spoilt for choice when it comes to sourcing new capital providers.
Mbindwane, however, has contended that Platfields still offers a highly discounted entry into the platinum sector with a shallow prospect targeting some 5 million ounces of platinum. The problem for Platfields is that investors can scan the JSE’s Platinum board and see more than a handful of junior platinum projects that are at more advanced stages of exploration on potentially more valuable projects.
It’s quite a quandary for Platfields … and a quandary that needs to be resolved sooner rather than later.
By Jenni McCann
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