Village to open sales process for platinum
Miner to be left with one gold mine but is looking at opportunities
VILLAGE Main Reef, which is tidying up its asset portfolio and consolidating its shares, will formally open a sales process for its platinum prospect and potentially line up a new purchase next year, CEO Ferdi Dippenaar says.
Shareholders voted almost unanimously on Friday to sell the Consolidated Murchison antimony and copper mine in Limpopo, and to a 20-for-1 share consolidation. The consolidation, which would take Friday’s share price from 37c to R7.40 each, is partly to lure investors in the US into the share register of the company that has the Tau Lekoa gold mine as its sole operating asset.
One shareholder with about 300,000 shares in Village raised concerns about the consolidation being an exercise in “corporate gymnastics” unless underpinned by a concerted effort by management to create value.
Gerhard Kemp, a fund manager and shareholder in Village, said American investors would not invest in an offshore stock worth just pennies and it made sense for Village to get its shares to about a dollar each.
Management was grilled about why Consolidated Murchison was being sold for R150m when the value was closer to R480m. An investment of R300m was needed by the new owners, Stibium Mining, an Australian company, Mr Dippenaar said.
Village has started a second definitive feasibility study into its Lesego platinum prospect to develop a mine a third of the size initially envisaged, because of capital constraints, he said on Friday.
A formal process to sell Lesego will be opened before the end of the year, allowing any “serious buyer” to conduct a parallel due diligence on the data, saving time once the study is completed in March to initiate a sales process, he said. This would leave Village with a single asset — its Tau Lekoa gold mine — as it closes the Buffelsfontein gold mine over the next three to five years.
Having just a single goldmining asset was a relatively risky investment proposition, Village chairman Bernard Swanepoel said. Village is looking at a number of opportunities across the mineral spectrum, he said. “I’d be disappointed if we, as a team, were not able to identify those opportunities in the next 12 months that would generate value for shareholders,” said Mr Dippenaar.
Village, which has experienced a precipitous fall in its share price from more than R2.40 in February 2012 to 37c, has changed its strategy to become a resources investment company from an operating mining company.
The regulatory environment in SA had made it exceptionally difficult for a small mining company to operate effectively, said Mr Swanepoel, the former CEO of Harmony Gold. “It’s just about impossible for a company the size of Village to function in the full operating space.”
Village, which has only a handful of staff in management and its head office, had to contend with hundreds of pieces of legislation, costing it millions of rand a year.
“That’s why Sandton is being built by lawyers and not mining companies,” he said, referring to the relentless construction of offices in the suburb north of Johannesburg that has become the country’s financial hub.
Village’s first attempt to become a resource investment company was a painful lesson in how badly it could go wrong, said Mr Swanepoel, an owner of 4% of Village. “Continental Coal was our first investment in that space and you can unashamedly call it an unsuccessful investment,” he said.
“It fitted perfectly with our strategy, but nothing makes you revisit that strategy quicker than getting a huge ‘snotklap’ and taking a massive write-down.”
Village invested R80m to buy a 16% stake in Australia’s Continental Coal, which was now raising $35m via a rights issue in which the South African company would not participate, Mr Dippenaar said. Village’s stake would be reduced to 2% after the rights issue, and it would exit Continental at some point, he said.
Village will not follow its rights and will be diluted to 2%, and is looking to exit in the future.