African Rainbow Minerals Ltd. (ARI), the South African mining company controlled by billionaire Patrice Motsepe, appointed merchant banks to advise it on potential platinum deals, its chief executive officer said.
“We hope to make the first announcement in the next two to three months,” Andre Wilkens said today in an interview. The Johannesburg-based company would prefer assets close to its current operations that it can control rather than buying stakes in listed companies, he said.
Motsepe is looking at platinum assets because “now is the best time” to invest in the metal, he said at a presentation earlier. African Rainbow and Anglo American Platinum Ltd. (AMS), or Amplats, own the Modikwa platinum mine and control the Two Rivers mine in partnership with Impala Platinum Ltd. Both are in South Africa’s platinum-rich Bushveld Igneous complex.
Amplats and Impala, the two biggest miners of the metal, face rising labor and electricity costs in South Africa and demands for increased local ownership in Zimbabwe. Anglo American Plc (AAL), which owns about 77 percent of Amplats, said Feb. 17 that it will review its platinum business, which is failing to generate acceptable returns.
Wilkens said there are “no formal discussions” with Amplats about possible asset purchases. African Rainbow will “see what becomes available” when Amplats decides to sell assets, he said today on a conference call. African Rainbow has “a close relationship” with Amplats, which hasn’t indicated “exactly what they want to do.”
On events in Zimbabwe, Motsepe said African Rainbow may make platinum investments in the country.
“We are looking, and we will allocate” resources in South Africa and Zimbabwe, Motsepe told investors today in Johannesburg. “I think Zimbabwe will come around, it has to.”
The Zimbabwean government said Impala must transfer 29.5 percent of its Zimplats unit to a Zimbabwe government fund in order to meet local ownership requirements, a letter to the company from the indigenization minister obtained by Bloomberg News shows.
African Rainbow has nobody “actively looking” at platinum in Zimbabwe, Wilkens said on the call. “We’re keeping our ears on the ground.”
The metal, used in devices that cut car emissions and to make jewelry, declined 0.3 percent to $1,707.50 an ounce by 3:03 p.m. in London, almost 26 percent below the 2008 record of $2,301.50.
African Rainbow slid 2.1 percent by the 5 p.m. close in Johannesburg. The FTSE/JSE Africa All Share Index also closed 1.1 percent lower.
The mining company intends to increase production at its Modikwa venture to 500,000 platinum group metal ounces, expand iron ore output beyond 16 million metric tons a year and double manganese production to 6 million tons, it said.
African Rainbow has approved spending of 885 million rand ($116 million) to develop a new pit at the Beeshoek Iron Ore mine, which will extend output to July 2014. African Rainbow produces iron ore and manganese in partnership with Assore Ltd. (ASR)
“We are making substantial progress with our growth projects and are excited about government’s stated commitment to allocate huge resources to upgrade rail, port and electricity infrastructure,” Motsepe said in a separate e-mailed statement. “This will support and enhance our aggressive growth strategy.”
African Rainbow mines coal in partnership with Xstrata Plc (XTA) and nickel with MCC Norilsk Nickel OJSC. It holds a 14.8 percent stake in Harmony Gold Mining Co.
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