Patrick Evans Replies to disparaging article:
following from message board of miningweb ....
stockhouse.com
Mr. Barry Sergeant
Miningweb
Johannesburg
Dear Barry,
I was shocked and dismayed to read your disparaging article on Messina Platinum., which appeared today. This piece falls far short of the usual high standard of financial journalism we have seen from you over many years, and appears to be designed to do malicious damage to our Company. I am deeply disappointed in you and MiningWeb. I’m particularly surprised that you did not even bother to approach me for comment before going to print.
Let’s address some facts, which are sorely lacking in your article:
1. You are well aware that as Southern Platinum owns 91.5 percent of Messina Limited, there is essentially no free float and, consequently, the trading levels of Messina Limited on the JSE are irrelevant and bear no resemblance to the underlying value of the assets. Had you made enquiries prior to going to print, you would have learnt that a further 6 percent of Messina is held by one shareholder. Consequently, 97.5 percent of Messina’s shares do not trade. Most of the balance is held by members of the Mphahlele Tribe, who also do not trade their shares. To the best of my knowledge none of us are sellers, so of what interest would the share price be? Clearly, none. The value of our business is more accurately reflected in the Southern Platinum share price, which is liquid.
2. You statement that Messina’s banking consortium is “piling pressure” on Messina is inaccurate and does not reflect what we have stated publicly in recent news releases. As you state, Messina secured a project debt facility in 2001 when the Rand was R8.62/$. Accounting alone for inflation since then, this would today equate to approximately R10.50/$. It is elementary that a payment schedule structured around R10.50/$ cannot be fully met when the Rand is trading at R6/$. Hence, over the past year we have been engaged in extensive discussions with Messina’s lenders to restructure the payment schedule and have made recent announcements of our progress. If anything, Messina’s lenders have been very understanding and supportive under the circumstances and have shown a keenness to work with us. This is attributable to their confidence in the Messina Platinum Mine, which you crudely and unfairly refer to as “a donkey”.
3. You make an inflammatory reference to “growing concerns over the standards of corporate governance and disclosure by Messina”. I, Messina’s chairman and the chairman of our Governance Committee of the Board would appreciate receiving details of the concerns that must have been expressed to you. We are unaware of any legitimate concerns on the part of any party. Both Messina and Southern Platinum adhere to the highest standards of corporate governance, both in Canada as well as South Africa. Our financial and legal advisors in South Africa and our financial and legal advisors in Canada are in very close and regular contact with senior management and the boards of the two companies. We work jointly to ensure that both companies meet the highest possible standards of corporate governance, so your statement is nonsense.
4. You are only partially correct in your reporting of my comments on Messina’s economics. If you had bothered to speak to me before going to print you would have understood the context within which I made those comments. For your belated information, the guidance we have provided the market is that in steady state full production Messina is able to achieve an operating profit even if the Rand strengthens to R5/$. This is not “spin” as you choose to characterise it, but is the consequence of a diligent planning process and a very good understanding of our asset’s performance capabilities. You draw your justification for your position from “recent scrutiny” of financial reports. Had you bothered to read our news release of December 2, 2004, you would have known that Messina reported its first operating profit in November, when the Rand was very much where it is today, even though we only milled approximately 90,000 tonnes of ore.
5. Your attributing Messina’s debt position in part to what you characterise as “numerous delays at Voorspoed” once again points to a disturbing lack of understanding of the topic you have chosen to write about. Had you bother to enquire, or indeed to just refer to our annual report or website, you would know what has transpired at Messina over the past two years that has resulted in a slower than originally planned build up of production. In 2002, the Board approved the expansion of Messina’s production capacity from the originally designed 80,000 tonnes per month to 120,000 tonnes per month. In addition, the Board approved the introduction of a new mining method – long-hole open stoping – which is not widely practiced in South Africa. These two key strategic decisions had the inevitable consequence of slowing Messina’s production build-up, which we knew would happen when we made the decision in 2002, and which we advised the market of when we made that decision. It is precisely because of those two key strategic decisions in 2002 that Messina is today able to be profitable in the unanticipated strong Rand environment we are currently experiencing. I can assure you, if we had not taken these decisions when we did, and if we had not made the added investment into Messina over the past two years, it is unlikely that the originally designed and financed mine of 80,000 tonnes per month would be able to survive in the current exchange rate environment.
6. You are correct in your comment that experience at mining steep-dipping ore bodies such as Messina is lacking in South Africa. It is precisely for that reason that we recruited the Australian mine manager, Glenn Baldwin, to the position of mine general manager a year ago. Under his leadership, the long-hole mining has rolled out quite successfully. We now have about six Australian miners working at Messina to train our local employees how to plan, develop and mine the Messina ore body successfully.
7. Your reference to the turn-over of senior staff is, once again, based on ignorance. The three managers you refer to left our employment for entirely different reasons. Our COO, Mr. Eksteen entered retirement last year and was replaced internally by Mr. MacPhee, who was being groomed for the position over a period of two years prior; Dr. Eyre, our Vice President Corporate Affairs was appointed to the position of CEO of a Canadian mining company, and has been replaced internally; and Mr. Barker resigned and we have not found it necessary to replace him. We have a well developed succession plan within our Company. There is no resemblance between the Company I joined four years ago and the Company I lead today. We have grown dramatically and as we have done so we have managed to attract some of the finest talent in the industry to work for us.
8. Your reference to me as an “absentee landlord” visiting Messina “now-and-again” is amusing, and oddly resembles the socialist thinking of President Mugabe of Zimbabwe, rather than that of an experienced financial journalist. Do you consider the CEO of Placer Dome to be an “absentee landlord” from South Deep? Do you consider the CEO of IMB to be an “absentee landlord” from IBM South Africa?
9. Your characterisation of Messina as an unsuccessful “punt on the Rand” for foreign investors is, once again, troublingly out of character with a financial journalist of your experience. Which South African gold, diamond or platinum mining company has been a successful “punt on the Rand” for any foreign investor? None, to my knowledge. Most of these companies are trading at or near three year lows, just as South Platinum is. So, why the special mention of Southern Platinum in this regard?
10. Your comments on my “making noises” about Black Economic Empowerment are equally puzzling. If anything, Messina has been a great deal quieter on this topic than most other South African mining companies. We, like all other South African mining companies, are seized with our obligations to meet the requirements of the new mining law and the accompanying mining charter. Our comments are not designed to signal anything to any one particular Black Empowerment company. In fact, we have had and continue to have close engagement with a number of well-respected Black Empowerment companies to ensure that Messina meets its statutory obligations. You erroneously state that the Dwaalkop Section of the Greater Messina is owned jointly by Mvelaphanda and Messina. In fact, it is owned jointly by Mvelaphanda and Southern Platinum.
11. Equally puzzling is your disparaging characterisation of “Messina’s fanciful three phase project build-up”, and the remark that “Messina has zero chance of raising further debt”. What warrants special mention of Messina in this regard? You are well aware that the entire platinum industry in South Africa has pulled back on development of new underground mines because of the strength of the Rand. The company that has moved most strongly to place new developments on hold is Angola Platinum, the world’s largest and richest platinum producer. Would it be so unusual if Messina had to do the same? There is nothing fanciful about the 17 million ounce resource at Phase 2 of the Greater Messina, nor is there anything fanciful about the 3 million ounce resource at Phase 2 of the Greater Messina. In a normal Rand environment, these projects, like many others in South Africa will be developed into mines, just as we’ve developed Phase 1.
Your scorning criticism of our small Company is difficult to understand. I, on the other hand, am very proud of our achievements. As a junior diamond company that had no platinum assets less than five years ago, we have grown to become one of a handful of platinum producers in the world. For an investment of less than $15 million we acquired control over the 10 million ounce Messina Platinum in 2000. Over the past four years we have grown our resource base at the Greater Messina to 25.6 million ounces through successful mine site exploration and the successful acquisition of the 9 million once Dwaalkop Section.
In the time it takes most major mining companies to study a project we financed and built the first mine at Phase 1, which was commissioned in late 2002. We have reported our first operating profit just two years after commissioning, which is a fraction of the time it took either Northam Platinum or Lonmin Platinum to report operating profits.
We were successful in recruiting one of the most experienced platinum operating teams in South Africa and we have created over 2,000 new jobs in one of the most highly impoverished regions of South Africa. Our training school at Messina is ISO registered and over the past three years has trained hundreds of new miners in skills that will ensure them employment for the rest of their lives.
While ramping up our production we have introduced innovation at Messina’s Phase 1 mine to make the mine safer, more productive and more profitable. We have successfully introduced mechanisation on a scale that will make Messina the largest underground mechanised platinum mining operation in South Africa.
With our roots as an exploration company we have invested heavily in platinum exploration to continue to grow our resource base and built value for our shareholders. We discovered the 3.7 million ounce Millennium Platinum Project in South Africa and have two further platinum exploration projects in South Africa in addition to our exciting Monts de Cristal PGM/Nickel Project in Gabon. All this while building Messina’s phase 1 mine and conducting feasibility and scoping studies over Messina’s Phases 2 and 3.
Despite our small size, we have made a material investment in the community in which we do business by re-building the local sewerage plant in the vicinity of Messina and undertaking to support its operating costs for the next decade. Not the most glamorous project, but a very essential one that will benefit hundreds of thousands of residents.
And I believe we have just begun. We have a vision to be a million ounce a year platinum producer within the next decade. Based on our achievements over the first five years of our exposure to the platinum industry I have confidence in our ability to achieve this. It is sad that you do not have the understanding to share our vision.
Sincerely,
Patrick Evans
President and CEO
Southern Platinum |
