By Allan Seccombe
ROYAL Bafokeng Platinum rose 7.4% in its stock market debut on Monday, after raising R2.98bn in South Africa's second-largest initial public offering this year.
ROYAL Bafokeng Platinum rose 7.4 percent in its stock market debut on Monday, after raising 2.98 billion rand ($440 million) in South Africa's second-largest initial public offering this year.
Shares of RBPlat -- a black-controlled, mid-tier platinum group metals producer -- first traded at 65 rand, compared with its pre-market price of 60.50 rand.
On Friday the company’s CEO Steven Phiri said it may shave R1bn off its R11,8bn Styldrift platinum project.
There was strong foreign interest in RBPlat when it secured R3bn in a private placement, raising capital towards the first phase of Styldrift that will propel the group towards 1-million ounces of platinum group metals (PGMs) in the next 15 years. The placement price gives RBPlat a market capitalisation of nearly R10bn.
RBPlat brings to the JSE the operating Boschkoppie platinum mine, which it plans to expand, and the Styldrift platinum deposit from which it will ultimately derive the bulk of its 1-million ounce target. The first phase will bring group output to 420000oz of PGMs from 2017, more than double the current 180000oz.
Some market commentators have said the 1-million ounce target is overly ambitious and unlikely to be met given the history of SA’s platinum producers failing to meet growth targets for a number of reasons.
“In the next seven years we will produce 615000oz of platinum group metals a year from Boschkoppie and Styldrift. We will definitely reach that. After that we will gradually grow to 1- million ounces. We have 73-million ounces of resources, so it’s not impossible,” Mr Phiri said .
Styldrift will reach steady state production in 2017, at which time RBPlat will begin paying dividends, he said.
RBPlat owns 67% of Bafokeng Rasimone Platinum Mine (BRPM) and the remainder is held by AngloPlatinum. BRPM is the vehicle housing the Boschkoppie mine and concentrator as well as Styldrift, which will be developed in a number of phases.
There is strong speculation that RBPlat will play some sort of early consolidator role around its projects on the western limb of the Bushveld Igneous Complex immediately to the south of Sun City in North West .
Or it could be a takeover target. Impala Platinum, which last month made a bid of R19bn to R20bn for BRPM, according to Royal Bafokeng Holdings CEO Niall Carroll, has been successfully seen off byAngloplat .
BRPM is on the northwestern tip of the large Impala lease area and has the relatively shallow resources Impala covets.
“The potential for corporate action (merger or acquisition) and development profile at relatively shallow depths make RBPlat an exciting prospect amongst tier 2 platinum producers,” said Imara SP Reid.
“We believe the growth profile along with a sustained improvement in PGM demand will reflect positively on the share price in the future. We initiate our coverage with a buy recommendation and target price of 7100c per share.”
More than half of the R11,8bn for the first-phase development of Styldrift will come from Boschkoppie’s cash flow . A substantial portion of the R1bn raised in the initial public offering will be spent on Styldrift.
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