Shareholders of Platinum Australia will receive approximately 0.386 (may vary) of a Jubilee Platinum share as consideration for the merger. The consideration shares will be in the form of Chess Depository interests (CDI) with listing of the CDI’s on the Australian Stock exchange to be sought
The aim of the merger is to lift the enlarged company into the top five global platinum producers and provide an integrated mine to metals company. The enlarged company would have both blue sky exploration and near-term development potential. Operations open pit which would make the enlarged company a significant low cost producer in the industry.
Members who hold Platinum Australia shares should receive in early April 2013 a Scheme Booklet that will detail the merger proposal. A meeting of Platinum Australia shareholders will be called, with a date in early May 2013 planned, to vote on approving the merger transaction.
Subject to all approvals and the meeting of conditions, the merger implementation date is planned to occur by mid-May 2013.
In Brief, Jubilee Platinum plc (Jubilee) is listed on both the London Stock Exchange (LSE) and Johannesburg Stock Exchange. Jubilee is a mining and development company with platinum tenements in South Africa. The following figure shows the locations of Jubilee’s assets (highlighted in red) and the approximate location of Platinum Australia’s assets (circled).
Jubilee’s key asset is its Tjate project (Jubilee’s interest 63%) where the company is targeting a 70 million ounce 6 platinum group elements (6 PGE) plus gold resource. Jubilee is in the midst of a feasibility study on Tjate. For Members interest the elements in 6 PGE are ruthenium, rhodium, palladium, osmium, iridium, and platinum.
The merger appears to be attractive as the enlarged company will have significant ground cover in a platinum rich region including an operating mine. Apart from the ground coverage, the enlarged company will also own processing infrastructure and operational smelters.
Under the merger, all debt would be extinguished and be replaced with Jubilee shares. Platinum Australia’s A$15.7 million debt at 31 December 2012 would be converted to Jubilee shares. Jubilee Platinum has no debt. We consider the conversion of debt to risk equity will further de risk the enlarged company.
Post the merger, Jubilee would commence the production of tailings through the Smokey hills plant by mid 2013, bring forward the operation by a full 14 months. Following on from this, a fully recapitalised Smokey Hills plant would recommence production during the second half of 2013. Smokey Hills has a nameplate capacity of 720,000 tons of ore per annum.
At the time of writing, Jubilee’s share price on the LSE was 8.13 pence per share (circa A11.83 cents). Under the Scheme of Arrangement this share price would place a value of circa A4.6 cents on each Platinum Australia share.
The release of Platinum Australia’s half year result to 31 December 2012 has revealed a balance sheet that has retained value. Our estimation of the balance sheet value is approximately A5.1 cents per Platinum share. The current merger value of A4.6 per share in our view compares favourably with our estimated residual value in Platinum Australia’s assets.
Platinum Australia had cash at 31 December 2012 of A$1.8 million and inventories of A$3.2 million. We note that as part of the merger transaction all debt will be extinguished and where required replaced with Jubilee shares.
The global auto industry is recovering and with it the price of platinum. We consider the price will stay at robust levels over the course of the year.
Shareholders are not required to take any action at this time regarding the merger transaction.
Ref: Fat Prophets
PLA Price at posting:
6.7¢ Sentiment: None Disclosure: Not Held
