Mostly: Classical

[amarksp]

ANO/ARQ
Let's hope ANO has first mover advantage as noted at end of this article...
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Changes in South African Regulations Spark Interest in Platinum Companies

By Tara Perkins
17 Jun 2005 at 04:23 PM


TORONTO (CP) -- Platinum prospectors from the Canadian mining sector could be focusing more on South Africa in the near future following a recent change in that country's legislation forcing the holders of a mineral right to 'use it or lose it.'

'You can't overstate the impact of the change in legislation,' which took effect May 1, says Frank Hallam, chief financial officer of Platinum Group Metals Inc. [TSX:PTM], a Vancouver miner concentrating on South Africa.

South Africa's Bushveld complex - rich in minerals including gold and iron ore - contains the vast majority of the world's supply of platinum, used widely in jewelry and pollution control equipment, said Hallam, whose company was recently bumped to The Toronto Stock Exchange from the junior TSX Venture Exchange.

'That is the No. 1 place you want to go in the world if you want to be a platinum miner or explorer,' says Jim Mustard of Haywood Securities Inc.

Until recently, the industry's dominant players - Anglo Platinum, Impala Platinum, Lonmin PLC and Russia's Norilsk Nickel - had the Bushveld complex wrapped up.

'It used to be that if they owned the ground on the most desirable mineral resources in the country, there was no requirement for them to do anything with that,' Hallam said.

'They could hold it forever. So there was no development of the junior mining industry.'

Changes to the law - which have been in the works for years now, but came into effect last month - have got junior platinum miners salivating.

'There's a lot of new deals being done with new partners coming in, equity investment,' said Platinum Group chief executive Michael Jones. 'It's a very exciting, dynamic time.'

Many Australian and European companies now have platinum projects in South Africa, but so far the Canadian entry into the market has been limited to a couple of companies, Mustard said. There is opportunity there, he said, but it doesn't come without risks.

One of the factors scaring prospectors and investors off has been the strong South African rand. It has squeezed margins in the platinum industry, which buys and sells the specialty metal in U.S. dollars.

'The South African rand has been on a tear the past year, and that's taken the wind out of the sale of a lot of operating companies,' Mustard says. 'It has caused a lot of pain for companies like PTM to finance their projects in South Africa.'

The rand changed directions recently, and 'if it continues that way, it will certainly attract more capital in that country,' Mustard says.

Jones suspects much of that capital will come from Canada.

'The Toronto Stock Exchange is the number one platform for mining finance in the world,' he says. 'There's more money raised in mining equity on the Toronto Stock Exchange than in the United States, the UK, and Australia combined.'

PTM shares, trading at about 40 cents in mid-2003, spiked above C$1.80 early last year, and have hovered around C$1 since. On Friday, they were trading at 95 cents, up one penny, with 1,300 shares trading hands.

The company lost C$2.2 million in the year ending Aug. 31, 2004, and also lost C$2.2 million in the three months ending Feb. 28, 2005.

Jones describes the Bushveld complex as a 400-kilometre salad bowl of molten rock that produces 70 per cent of the world's platinum.

In October, PTM partnered with the world's largest platinum company, Anglo Platinum, on a joint venture project covering 67 sq. km's. A South African company, Africa Wide Mining, will finance 26 per cent of the project.

As part of the legislative changes, South Africa has set a policy objective 'that you have to find a way to get 26 per cent ownership of the minerals into the hands of local, historically disadvantaged South Africans within 10 years,' Jones says.

Mustard says the 'black ownership requirement' is one of the issues keeping many Canadian juniors out of South Africa.

'It's not an easy concept for many. It's not an easy concept for investors,' he says.

Another Vancouver company, Anooraq Resources Corp. [TSXV:ARQ] has qualified as a Black Economic Empowerment company in South Africa - the first offshore firm to do so - through a reverse takeover by Pelawan Investments Ltd., a firm owned by 'historically disadvantaged South Africans.'

That deal sets the stage for other companies to pursue the idea, Mustard said.

The price of platinum - which is used predominantly in jewelry and catalytic converters for vehicles - has soared from about $500 per ounce to $880 over the last five years. The cost of mining the metal is also expected to rise as the limited supply of near-surface platinum in South Africa runs out.