Wesizwe Platinum Received Funding Of $877 Million From China

South Africa’s platinum explorer Wesizwe Platinum received funding of $877 million from China. The current deal represents China’s biggest investment in the South African mining sector. The entire project has been concluded with the signing of the final agreement between Wesizwe Platinum, Jinchuan Group Limited (“JNMC”), China Africa Development Fund (“CADFund”) and Micawber Limited (“Micawber”). The financial agreement represents a total and varied financing solution of $877 million, consisting of a combination of secured at globally competitive financing rates and equity.

Wesizwe Platinum will receive an equity injection of $227 million through JNMC and CADFund subscribing for approximately 732.5 million Wesizwe Platinum shares. These shares represent 45% of the share capital of Wesizwe Platinum. Furthermore, Micawber will subscribe for about 97.4 million ordinary shares, which represents almost 6% of the share capital of Wesizwe Platinum.

It is widely known that Wesizwe Platinum is a famous explorer and developer of platinum group metals (PGM). The company is involved in the high quality platinum projects on the Bushveld complex near Rustenburg in the North West province of South Africa. In fact, the deal will inject $877million to enable the company to build the Frischgewaagd-Ledig platinum mine, near Rustenburg in the North West province.

Moreover, the consortium has to contribute $650 million in order to help Frischgewaagd-Ledig achive a full pgm production by 2018. Even if South Africa currently supplies about three-quarters of the world’s platinum, unfortunately the global climate is quite tensioned.

There are also some issues that need to be solved between members of the Bakubung royal family and the traditional council. The main problem is who controls the stake in Wesizwe and until is not 100% resolved, this could still hamper progress.

This is not the first problem Wesizwe has to face. When the global crisis hit in 2008, Wesizwe was on the point of concluding financial arrangements with Deutsche DBS and Absa Capital, but the agreement was never finalized.

Moreover, in 2008 the share price was knocked down from R9, R10 to R2. These turbulent changes made investors more undecided. They do not want to be too optimist about the latest recovery of the company.

There are still investors who want to get involved is risky cash-generative projects (remember that platinum is now worth twice as much as gold) and Wesizwe tries to take advantage of this financial trend.

The company wants to start building in 2011 in order to get into production by 2014-2015. They will benefit from the increased demand from the platinum sector. Anyway, there are not too many chances for Wesizwe to compete with Anglo Platinum and Impala Platinum, the world’s top producers of the platinum, in terms of output.