Lonmin enters joint venture for platinum in Alaska
May 23, 2003
By Sherilee Bridge
Johannesburg - Lonmin had entered into a joint venture deal with two North American firms to look for platinum in Alaska, the firm said yesterday.
The third-largest platinum producer after Anglo Platinum and Impala Platinum, London-listed Lonmin's existing platinum operations are all based in South Africa.
The company, seeking diversification from its exposure to South Africa, toes the same line as the other four UK mining groups with local operations.
Jack Jones, the resources analyst at CIBC World Markets, said all five UK mining groups were now following the same basic strategy.
"At Lonmin we see numerous strategic options although high near-term risks," he said.
At the three UK majors - BHP Billiton, Anglo American and Rio Tinto - "simple diversification is being overtaken by strategic differentiation".
CIBC World Markets believed that besides Lonmin, Anglo American with a 50 percent South African exposure faced the greatest diversification pressure.
While the initial response to Lonmin's diversification plans was that industry consolidation would hinder acquisition ambitions, Jones said these pressures could prove to be misplaced.
"An initial review identifies over 20 potential targets or partners for Lonmin in precious metals, base metals, established markets and emerging markets," he said in a report on diversification this week
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Lonmin's announcement on the joint venture is the first since the company said it had hired Gilbertson as a consultant to help out on its diversification and black economic empowerment strategies.
In terms of a deal with Toronto-listed Freegold Ventures and Pacific North West Capital, Lonmin will foot this year's $810 000 exploration bill.
The company also has the option to continue to fund the Alaskan-based Union Bay Project, by spending a minimum of $1 million a year in 2004, 2005 and 2006 and $750 000 for each year thereafter.
John Royall, the vice-president of business development at Pacific North West Capital, said it would operate the project during the exploration phase and Lonmin might earn up to 70 percent interest in the project by delivering a full feasibility study.
Johnson Matthey's annual platinum review, released earlier this week, indicated that platinum demand grew by 5 percent to 6.5 million ounces in 2002, while global supply increased by only 2 percent to 6 million ounces over the year.
The result was a supply deficit of 570 000 ounces.
South Africa's attributable production is expected to surpass 6 million ounces by 2006.
This production increase is on a par with the 10 percent growth anticipated globally.
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