Platinum price prompts SouthernEra asset split

With the price of platinum at heights not seen in over 20 years, SouthernEra Resources (SUF-T) is considering splitting its platinum and diamond holdings into two separately listed companies.

Originally a diamond miner, SouthernEra jumped into the platinum group element business in 2000 by acquiring a 54% stake in Johannesburg-listed Messina. Messina owns the Voorspoed, Doornvlei and Zebediela sections of the Greater Messina platinum project within South Africa’s the Bushveld igneous complex (BIC). SouthernEra’s stake in Messina has since grown to 73.1%.

At last count, the phase 1 area at Messina contained probable reserves totalling 10 million tonnes of Merensky Reef grading 4.78 grams platinum, palladium, rhodium, ruthenium, iridium plus gold (5PGE plus gold) per tonne and 15.5 million tonnes of UG2 reef grading 5.13 grams 5PGE plus gold, for a total of 3.93 million contained ounces. The probable resource stretches to a depth of 1 km and is home to a similar tonnage of measured resources at slightly higher grades. The project is divided into four phases, each of which represents a major fault block.

The company also has a half-interest in the Dwaalkop section of the Greater Messina, where measured and indicated resources total 27.8 million tonnes running 5 grams 5PGE plus gold; another 2.6 million tonnes of inferred material runs 6.1 grams per tonne. Johannesburg-listed Mvelaphanda Resources owns the remaining half of Dwaalkop.

SouthernEra’s PGE portfolio also includes the Millennium platinum project on the southeastern lobe of the BIC in Mpumalanga province. The project is home to an indicated resource of 30.6 million tonnes grading 3.76 grams 5PGE plus gold for around 3.7 million contained ounces.

The company’s main diamond asset is a half-stake in the Klipspringer mine in Limpopo province. Mining was suspended there late last year as a rising South African rand made the operation unprofitable. During the past three months of 2003, production slipped to 16,082 carats, owing to a strike that lasted into July.

SouthernEra plans to resume mining at Klipspringer once the rand depreciates. De Beers Consolidated Mines, the diamond unit of Anglo American (AAUK-Q), and an affiliated black-empowerment company, Naka Diamond Mining, own the remaining interest in Klipspringer.

SouthernEra also has an 18% free-carried interest in the Camafuca diamond project in Angola — the world’s largest known diamond-bearing kimberlite complex. A feasibility study in late 2000 pegged inferred resources at 209.5 million cubic metres averaging 0.11 carat per cubic metre, equivalent to 23.2 million carats valued at US$109 per carat. Government authorization for the formation of the project’s operating company is still pending.

The company also has diamond exploration projects in Canada, South Africa, Gabon, Botswana, the Democratic Republic of Congo, and Australia.

“In order to enhance the value for shareholders of both its platinum and diamond holdings, the board of SouthernEra believes the unbundling of the company into separately listed platinum and diamond mining companies may be appropriate,” the company states.

SouthernEra says the plan to split the assets will go ahead only if there are no negative tax implications, and financing can be guaranteed for the diamond company. The scheme still requires board and regulatory approval.

Of late, SouthernEra shares have been mired at the lower end of the 52-week trading range of $4.10-6.49.