Impala looking at Afplats bid

Impala Platinum (IMPUY-O, IPLA-L, IMP-J) has announced it approached junior platinum developer African Platinum (APP-L, AFRPF-O) with a takeover offer.

Implats made the announcement in response to one by Afplats, which in turn had been required when Afplats shares rose in price. Afplats rose UK3.25p at the start of the month and has traded on volumes in excess of 2.5 million shares a day ever since.

Implats said its proposed bid was 0.55, which would value Afplats at 260 million.

Afplats shares finished at UK50.25p on a volume of 31.7 million shares in London on Wednesday, having traded as high as UK53.50p.

In a bid for Afplats, Impala would be seeking the Leeuwkop platinum project, on the western limb of the Bushveld igneous intrusion in South Africa. The two companies had already concluded an agreement that would have given Implats a 29.5% interest in Leeuwkop and Afplats’s other interests for US$148 million.

The additional prize is a possible expansion of resources at two neighbouring projects, Inkosi and Imbasa, which cover the two principal mineralized reefs of the Bushveld complex, UG2 and Merensky.

Both companies said discussions over a possible bid were ongoing.

Leeuwkop has a measured and indicated resource of 64 million tonnes grading 3 grams platinum, 1.4 grams palladium and 0.5 gram rhodium per tonne on the UG2 reef. Another 151 million tonnes grading 2.9 grams platinum, 1.3 grams palladium and 0.5 gram rhodium are inferred.

On the Merensky reef, Leeuwkop has 34 million tonnes in indicated resources, at grades of 1.8 grams platinum, 0.9 gram palladium, 0.1 gram rhodium and 0.3 gram gold per tonne. The inferred resource on the Merensky reef is 178 million tonnes at 1.7 grams platinum, 0.9 gram palladium, 0.1 gram rhodium and 0.3 gram gold.

There are comparable inferred resources on both reefs on Inkosi (about 70 million tonnes on each reef) and Imbasa (about 110 million tonnes on each).

Feasibility work on the Leeuwkop project put the size of the reserve, all on the UG2 reef, at 54 million tonnes with equivalent grades to the measured and indicated resource. The project could produce at 300,000 oz. total precious metals annually, with a cash cost near US$244 per oz. if each metal is taken as a coproduct.

Cash flow models of the project put its internal rate of return at 21% with a net present value of US$400 million at a 5% discount rate and US$179 million at a 10% discount rate.