News

August 14, 2008

Eastern Platinum Offers Many Attractions To A Chinese Bidder

By Charles Wyatt

With Xstrata’s offer for Lonmin on the table, now’s a good time to take a close look at Canadian and Aim-listed Eastern Platinum (EastPlats), which has developed rapidly into a mid-tier platinum producer in South Africa. Xstrata’s offer could signal a period of consolidation in the platinum sector and the Chinese are hardly likely to let this occur without participating themselves, since they have no platinum or associated metals of their own and their needs are rising as growth proceeds. Interestingly, Canaccord Adams produced a note on EastPlats at a crucial moment – plum between the Lonmin bid and EastPlats’ own quarterly results. Inevitably comparisons are made with the price offered by Xstrata, which equates to US$1,300 per ounce of platinum production. Working off its estimates for attributable production in 2009 of 97,300 ounces, Canaccord Adams reckons that an equivalent bid would put a value of C$1.86 per share on EastPlats, which compares favourably enough with the current price of C$1.44.

This is right at the bottom end of the scale, however, as the difference between Lonmin and EastPlats that the latter is steadily increasing production under the leadership of Ian Rozier, while Lonmin is strangely becalmed with rumours  circulating that its chief executive Brad Mills is under pressure to up his game or depart. One of the London dailies managed to obtain denials from both sides that they had initiated such rumours, but there is rarely smoke without fire and Lonmin’s...