JOHANNESBURG (miningweekly.com) – The introduction of Mick Davis' Xstrata and Brian Gilbertson's Pallinghurst would turn the platinum-mining business on its head, RBC Capital Market analyst Leon Esterhuizen predicted on Tuesday.

Esterhuizen said that, by their very nature, both Xstrata and Pallinghurst would redefine cost, which would put pressure on both Impala Platinum (Implats), where there is already board tension, and on Anglo Platinum (Angloplat), which was doing fairly well at reducing costs but had not shown the abilility to move as fast as Xstrata.

Davis, Esterhuizen said, was already shouting from the mountain top that Xstrata would be a big platinum player, "almost, come hell or high water", and there was every indication that Gilbertson would be building a million ounce business in the area north of the Pilanesberg, where Platmin also owned Magazynskraal.

Xstrata already had nearly 25% of Lonmin and its eye remained on Anglo American, which controlled Angloplat.

"There are no two ways about it, the introduction of Davis and Gilbertson is going to turn the platinum-mining business upside down.

"I don't think that Anglo American is off Davis' radar screen at all. I think he is going to come back for Anglo American at some or other point. But very clear is his ambition to be big in platinum," Esterhuizen said.

On Gilbertson now being joined by new Platmin CEO Tom Dale, Esterhuizen added to Mining Weekly Online: "The one thing we know about Dale is that he's an aggressive character when it comes to right-sizing companies and getting companies into the right frame of mind.

"He was the hatchet man at Gencor-Gengold. He was supposed to set Sallies on the right track, but to some extent, Sallies was too small a company for him. With Gilbertson drawing him in, you can safely conclude that Pallinghurst is getting ready for some serious stuff with Platmin," Esterhuizen said.

Esterhuizen has for some time seen the platinum industry as being ripe for realignment: "The fact that realignment moves have not been made in the platinum industry is very surprising to me."

Xstrata already has its operational toe in the platinum-mining water with fairly low-cost ounces at Eland Platinum and low-cost ounces at Mototolo. The company has also secured an interesting option agreement with Nkwe Platinum, which could tie up a large part of the eastern limb of the Bushveld Complex.

"It's a given that Xstrata is going to come in and mop up and be a very big player in the platinum space and, by the very nature of the company, it's going to redefine cost.

"One can anticipate that Xstrata will to come into the platinum space to show just how low the costs can be, and put a lot of pressure on Implats and Angloplat.

"If I were Angloplat and Implats, I would try to get into position before that happens. It doesn't make any sense to buy the shares of companies that will constantly be under pressure from Xstrata and Pallinghurst.

"It's a better bet to go for the juniors that are shallow, low cost and, in the case of some, relatively high grade as well," Esterhuizen recommended.

Other observers saw the surprise coming together of Gilbertson and Dale as having the potential to light a fire under Platmin's already low-cost Pilanesberg platinum operation, which will be producing more significantly by year-end.

They concurred that having Platmin's Gilbertson and Dale at the one end of the platinum spectrum and Xstrata's Davis at the other had the potential to change South Africa's platinum-mining landscape, at a time when Angloplat is shedding personnel and closing shafts, and Implats is undergoing one of the most tumultuous board battles that has ever been counternanced, involving the acrimonious sacking of chairperson Dr Fred Roux.

Pictures in Mining Weekly Online's archives are resplendent with all four of those personalities - Gilbertson, Davis, Dale and Roux - posing together while still at Gencor, before it morphed into BHP Billiton, the world's largest mining company.

Pallinghurst CEO Arne Frandsen has made it clear to Mining Weekly Online that Platmin's "glass is only half full" when it comes to platinum.

Gilbertson has had a love affair with platinum since his days with Johannesburg Consolidated Investments.

On listing Pallinghurst on the JSE in August last year, Gilbertson described platinum-group metals (PGMs) as "a very much misunderstood" group of metals that "the world just wouldn't operate without".

While the use of platinum in automobile catalysts and jewellery is well-known, what is not as well known, Gilbertson told Mining Weekly Online at the time, is that without PGMs there would be:
* no fibreglass;
* no refining of oil that put petrol into vehicle fuel tanks;
* no nitric acid and therefore no nitrogenous fertiliser to grow crops; and
* the absence of an estimated 20% of all consumer products, that either contained PGMs, or required the metals in their production.

"It's a critically vital element, and 80% of the world's reserves are here," Gilbertson said of the preponderance of PGMs in the Southern African region.

"It's a set of metals that has a wonderful future for the years ahead," he added of the industry that provided his "first serious job" in the late 1960s.

Gilbertson was chairperson of the former Gengold when Dale was the Gengold MD, and both were instrumental in the merging of Gengold-Gold Fields in the mid-Nineties.

Dale went on record ahead of that merger as being committed to "re-engineering" the gold-mining industry, by placing a full focus on productivity and costs.

Platmin, listed in Toronto, London and Johannesburg, announced its board changes on Monday.

It said that Ian Watson would be retiring as CEO and executive director of Platmin and would be replaced by Dale from December 1.

Besides being MD of Gengold and CEO of Sallies – where Roux was also the chairperson – Dale is also a former CEO of Mopani Copper Mines in Zambia.

"Platmin is uniquely positioned with a large shallow resource base on the cusp of production. Taken to its full potential, it will be a very significant industry competitor, and should realise much value for shareholders," Dale commented.

Platmin said that Keith Liddell, its current executive chairperson, would step down, also on December 1, and would become one of the two nonexecutive deputy chairpersons, Kwape Mmela being the other, with Gilbertson as nonexecutive chairperson.

Gilbertson, Platmin pointed out, had held various senior positions in global mining, including that of MD of Rustenburg Platinum Holdings – now Angloplat – and chairperson of Implats. He is currently chairperson of Pallinghurst and has been a director of Platmin since December 2008.

Gilbertson said that he had worked with Dale for five years in the gold-mining industry and believed that Dale would bring the focused resolve needed to realise Platmin's substantial potential.

Besides being involved with platinum, Pallinghurst was also rebuilding Fabergé into the iconic global brand that it was in years gone by; developing a business in coloured gemstones; and acquiring manganese and other raw materials needed for steel making.

Gilbertson has told Mining Weekly Online that both the Pallinghurst and the Platmin management teams had spent considerable time calculating the cost position of Platmin's Pilanesberg mine and had reached the conclusion that its costs would be in the lowest-cost quartile.

"If you look at independent mine-by-mine analysis, I think it's fair to say that we are in the lowest 10% and Platmin is the lowest entry point from a cost point of view that you can enter into a listed company," Frandsen added.

"Once it's in full production, we could be looking at one of the most attractive investments in the industry from a cost profile point of view," Gilbertson commented, adding that the company was using its platinum platform to consolidate the platinum industry.

"From the manganese and iron-ore to the coloured gemstones, Fabergé and platinum, each has the potential to provide superior returns once markets normalise. Each of them has the potential to offer a little bit extra, which makes us quite excited about them standing on their own two feet going forward, and being separate businesses in their own right," Frandsen told Mining Weekly Online.

On Pallinghurst's co-owned manganese asset in South Africa's Kalahari, Frandsen added: "The indications are that we are sitting on what is arguably one of the world's top-three on-mine deposits of manganese, with a reserve base that will allow for 50 to 60 years of mining, at very significant levels."

At Pallinghurst's Kagem emerald mine in Zambia, the focus has been on driving down the operational costs and ensuring that the emeralds are mined as cheaply as possible so that it will be charged up in the event of a market upturn.

Pallinghurst's small iron-ore opportunity is being developed in the central Yilgarn region of Western Australia, where rail and port logistics are already in place, unlike in the Pilbara, where the company would have had to establish its own rail and port links at considerable cost. Yilgarn is located north of the gold-mining centre of Kalgoorlie, thousands of kilometres south of the Pilbara region in the north-west of Western Australia, where BHP Billiton and Rio Tinto have their large iron-ore mines.