19th Jul 2016 10:49
LONDON (Alliance News) - Pan African Resources PLC Tuesday said it has managed to keep feedstock flowing to the Phoenix platinum operations in South Africa after signing a deal with Samancor Chrome Ltd.
Pan African's platinum operation is situated on the same property that was owned by London-listed International Ferro Metals Ltd, which recently sold its troubled South African subsidiary that held the asset after entering into business rescue proceedings.
International Ferro's "financially distressed" unit that held the company's assets was hit by a wave of factors last year that led to its demise, as the company battled strike action, falling ferrochrome prices, a fall in steel output driven by the economic slowdown in China, and higher power costs.
Pan African had a deal in place to take some of its overall sulphide and oxide feedstock from International Ferro's processing operations to feed its own platinum operation, and Pan African also sources electricity, water and "certain other services" from the nearby operation.
Although the platinum operation was not reliant on the feedstock from International Ferro's operation, the business rescue proceedings "created a number of uncertainties and operating difficulties" for Pan African's Phoenix operation.
Following the business rescue proceedings, a subsidiary of Samancor Chrome agreed to purchase International Ferro's troubled subsidiary, and Pan African has now been able to effectively transfer the previous agreement to Samancor to keep the deal going.
"Even though the agreement does not guarantee current arising feedstock to Phoenix (this will be dependent on the manner in which [Samancor] utilises the assets), it places Phoenix in a position where it will continue operations under similar conditions as those that existed prior to the business rescue proceedings," said Pan African.
"It also ensures that Phoenix's operations and interests are safeguarded. As previously stated, Phoenix also has alternative sources of feedstock, which it processed during the business rescue proceedings," Pan African added.
Pan African shares were up 3.6% to 21.75 pence per share on Tuesday.
By Joshua Warner; [email protected]; @JoshAlliance
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