Platinum donkey - Is this articles negative bias deserved?
From Stockhouse; suggest read the followup posts...
stockhouse.com
By: Barry Sergeant
Posted: '25-JAN-05 14:40' GMT © Mineweb 1997-2004
JOHANNESBURG (Mineweb.com) -- Investors in Messina Platinum are losing patience, apparently aware that in the background, the company is about to enter drowning-level in a pool of debt. The stock has slid from a high, on November 26, 2002, of R102 on the JSE Securities Exchange, to very-recent lows of R18 a share.
It is no secret that a banking consortium, led by Johannesburg-based Rand Merchant Bank (RMB), is piling pressure onto 91.5 percent Messina parent, Toronto-listed Southern Platinum. If the debt crisis cannot be resolved, Messina would naturally be headed for bankruptcy.
Amid growing concerns over the standard of corporate governance and disclosure by Messina, its president and CEO, Patrick Evans, was quoted in the media this week as saying that Messina’s single operation, Voorspoed, is “operationally profitable” at R5 to the dollar. Evans, previously a diplomat, is an expert in spin but may just have crossed one line too many.
Recent scrutiny of financial reports suggests that Messina needs something monumentally higher, at closer to R8 to the dollar, after taking into account the 20 percent fees payable to Impala Refining Services (IRS), and other costs that impact natural cash flows. IRS undertakes the highly-sophisticated refining and marketing of PGMs; Voorspoed mines and concentrates.
But the debt crisis at Messina hinges not only on a rand-dollar exchange rate that apparently nobody had anticipated. It is also about numerous delays at Voorspoed, not least due to the deposit’s characteristic as deep-dipping, by South African standards, at 58°.
There are also perceptions that the de-mothballing of Voorspoed involved too many fatalities, due to a combination of the dip, underground flooding, and installation of long-walling, a system hardly known or tested in South African deep metal deposits. There has also been a worryingly high turnover of senior staff, including departures of Mike Eksteen, Sally Eyre and John Barker, among others. There has also been lots of labour tension down at the mine. Evans has run Messina essentially as an absentee landlord; a boss who visits now-and-again from Toronto.
The key focus, however, remains on resolution of the looming debt crisis. On December 20, Southern Platinum said Messina had made “further encouraging progress” towards restructuring its debt facility with the RMB consortium. “Agreement in principle” was reached with the consortium to defer the principal portion of the February 2005 payment of about R70 million (roughly $12 million). The interest portion of the payment (roughly $4.5 million) would be met through arrangement of inter-company facilities between Southern Platinum and Messina.
However, final terms of the agreement were expected to be concluded “in early January 2005,” when “terms for the restructuring of the balance of the outstanding facility are also expected to be finalised.” Then, on January 13, news came through that discussions over the restructuring or replacement, or elimination of project debt were continuing and “could have a material effect on the price of Messina securities.”
The previous owner of Messina, Impala Platinum, mothballed Voorspoed in 1992, during a trough in PGM prices, after having spent R136 million on shaft sinking, infrastructure and development. In mid-1999 Impala sold its 54 percent stake for R65 million to what was then SouthernEra. Messina has current debt of R230 million; the current debt rescheduling is not the first. Messina first took up debt in September 2001, when the rand was almost 50 percent weaker to the dollar, against current quotes of R5.95. If Messina was a punt on the rand for its foreign shareholders, it is a story that has gone horribly wrong.
Beyond the looming debt crisis, it appears that a Hobson’s choice confronts Messina. Evans has been making noises on the black economic empowerment (BEE) front, diverting attention to Mvelaphanda Resources which owns 50 percent of Dwaalkop, a PGM-hosting property between Voorspoed and Doornvlei. Evans has long spun it that Dwaalkop (with Messina holding the other 50 percent) and Doornvlei will form the next phase in Messina’s fanciful three-phase project build-up.
As matters stand, Messina has zero chance of raising further debt and shareholders of its Toronto-listed parent will have little, if any, appetite for a capital issue. As for Mvelaphanda Resources, why would it buy into Messina at R18 a share, when it is headed for R1.80 a share? |
