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Platinum Group warns it needs more cash, debt waivers

Platinum Group Metals Ltd.'s mining and debt woes continue as it suffers a slow ramp-up of the Maseve platinum group metals operation in South Africa and faces increasing pressure to keep up with debt requirements.

In a June 9 operational update, Platinum Group said it needed more cash and was looking for another waiver to debt terms that require it to hold at least US$5 million in working capital.

It is the latest debt-related headache for Platinum Group amid a rocky Maseve start up, which was commissioned in early 2016 but has yet to reach commercial production.

Platinum Group's lenders are Sprott Resource Lending Partnership and Liberty Metals & Mining Holdings LLC, a subsidiary of Liberty Mutual Insurance.

The company borrowed US$40 million from each of Sprott and Liberty Metals & Mining in 2015 to help fund the final stage of Maseve's construction.

But, dogged by the slow pace of Maseve's ramp-up, Platinum Group has repeatedly required the lenders to waive and amend debt covenants to stay in good standing since borrowing the money.

These terms include a minimum level of production that Platinum Group is supposed to hit by certain dates. After debt covenant revisions in April, it is now required to hit 60% of planned production, based on a three-month rolling average, for a period that began March 31, and then 70% of planned production for a period set to begin June 30.

It's not clear what those production minimums are — the company could not immediately be reached for comment — but Platinum Group said in the latest operational update that mine performance was still lower than targeted.

Output has, otherwise, steadily improved this year. May was the best month since commissioning in terms of production, Platinum Group said, with 2,480 ounces of 4E PGM — comprising platinum, palladium, rhodium and gold — compared to 2,256 ounces of 4E PGM in April and 1,351 ounces of 4E PGM back in January.

Platinum Group did not specify how close its working capital is to the minimum US$5 million requirement, but it is clearly in sight given the junior miner's June 9 warning.

The company last reported working capital of US$6.7 million as of Feb. 28, and subsequently raised US$20 million in a financing which closed April 26.

But with Maseve still not cash flow positive, Platinum Group is no doubt eating through the proceeds. The company is considering various funding solutions including debt, equity and asset sales.

"While the company believes that further funding and waivers for debt conditions will be achieved, there is no assurance that such will be concluded on terms acceptable to the company, or at all," Platinum Group Metals said.