An aerial view
of Wesizwe’s
Frischgewaagd-Ledig
core project area
on the Western Bushveld
.  
Johannesburg, South Africa — MININGREVIEW.COM — 06 November 2008 – Emerging platinum producer Wesizwe Platinum has decided that deferral of its R5.6 billion Frischgewaagd-Ledig core project on the Western Bushveld complex would be detrimental to shareholder value, and that the project should proceed according to plan – subject to the implementation of certain amendments to project structure and financing.
 
In a strategic update released here, the company said that, with due consideration of the current global economic situation, the project financing options were being reviewed, as an equity financing component would be excessively dilutive to current shareholders if raised in a single offering as originally planned.

Wesizwe explained that the project capital for the project was being expended over a period of 10 years as it was not necessary to raise the entire amount at this point in time. Consequently, the project was being divided into a series of discrete phases, and the capital required for each phase would be raised incrementally.

The company has negotiated with the EPCM contractor, TWP and the shaft sinking contractor, Murray and Roberts Cementation, to repackage the current arrangements accordingly, and they have agreed that the project would be further broken down into smaller work components than initially envisaged in the original contract.

The Wesiswe announcement confirmed that the first phase would be the shaft sinking operation, which would take two years and cost approximately R1.8 billion under the revised capital raising target. This amount was considered achievable in current market conditions.

Completion of the shaft sinking operation will provide access to the ore body and considerably de-risk the project technically. By adopting a modular approach to developing the project using existing cash resources, the company will proceed with commissioning the site preparation while simultaneously raising the finance for the pre-sink and sinking phases of the project.

The above options and subsequent decisions were taken in full consultation with the Company’s principal service providers, namely TWP Consulting (Pty) Limited and Murray & Roberts Cementation (Pty) Limited. Both these companies are fully committed and have indicated their willingness to be highly innovative in the approach taken in the development of the project.

Wesizwe CEO Michael Solomon, commented, “Wesizwe is well known for its innovative approach to project and risk management. What we are doing here in modularising the capital contracts is completely consistent with our highly successful reverse engineering strategy that took the project from first borehole to BFS in record time for a project of this size, and was a full year ahead of schedule on completion. By adopting this modular approach in this difficult economic environment, we will keep the project on track and enhance our competitive edge, while mitigating shareholder dilution,” he added.

The company is scheduled to be cash generative in 2013. “We anticipate that by then the economic recovery will have some traction and we will hit the production road running,” Solomon predicts.

“Five-year platinum price forecasts from a number of institutions range between $1 300 and $1 500/oz, while our BFS was undertaken at $1 125/oz at a long-term exchange rate of R9.17 to the US dollar,” he points out. This is entirely realistic even in the current environment.”