Investments | Platinum group metals (PGMs)

South Africa produces almost 80% of the world’s platinum group metals. Despite the US dollar price of platinum contracting from above $2200 an ounce in early 2008 to below $1000 at the end of that year, future demand for platinum is forecast to continue to grow, particularly from the auto catalyst industry.

It is estimated that 20% of all consumer products either contain PGMs or require them in their manufacture.

In May 2008, Pallinghurst Resources and certain strategic equity partners, collectively known as the PGM consortium, formed a joint venture with the Bakgatla-Ba-Kgafela Tribe, the PGM SPV.

Pallinghurst Resources has acquired a see-through interest in PGM SPV of 9.3%.

PGM SPV is a highly attractive investment vehicle for exploiting value enhancing PGM investment opportunities.

Founding investments were in the Moepi Group, which was 100% acquired in December 2007. Moepi holds almost 28% in Boynton Investments, a private company, whose primary assets are located in the Western Limb of the Bushveld Igneous Complex (BIC), and are controlled by Platmin, the AIM and Toronto listed emerging PGM producer.

33⅓% interest in Richtrau (Pty Ltd) whose sole asset is prospecting rights at Magazynskraal, a farm north of the Pilanesberg, was the second of the founding investments.

Most recently, the PGM consortium, PGM SPV and the Bakgatla entered into an investor’s and subscription agreement to acquire the equivalent of almost 70% of Platmin shares. The transaction was initiated by the consortium and the PGM SPV as a means to increase its exposure to Boynton Investments, and provide an alternative means for Platmin to fund its exploitation of its Pilanesberg Platinum Mine. Platmin owns 72% of Boynton Investments.

The Platmin transaction provides a publicly listed platform to potentially consolidate PGM SPV’s PGM interests, gives PGM Consortium and PGM SPV control of Platmin, and provides Platmin with sufficient equity funding to complete construction of the Pilanesberg mine.

In addition, Platmin will be fully funded, unhedged, and lowly leveraged with first production of PGM concentrate scheduled for March 2009. The annual production target is 250,000 ounces of PGMs per annum, of which 150,000 will be platinum itself.

Importantly, the Platmin transaction holds the promise of future upside potential through regional consolidation.