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Though Eastern Platinum is pulling out of South Africa because of rising costs and stagnant markets, two other Canadian companies are plunging ahead.PHILIMON BULAWAYO/Reuters

Even as one Canadian mining company is abandoning South Africa's troubled platinum sector, two other Canadian miners are plunging ahead with ambitious plans here.

Vancouver-based Eastern Platinum Ltd. announced the sale of its South African assets to a little-known Chinese company for $225-million (U.S.) in cash, provoking surprise and skepticism from some analysts.

Last year, the company suspended its Crocodile River platinum project in South Africa because of what it called a "perfect storm" of labour unrest, rising costs and stagnant markets.

Eastplats announced on Friday that it is selling Crocodile River and all of its other South African assets to Hebei Zhongbo Platinum, a company that seems almost unknown. The Chinese company "has never been mentioned in the press or online (as far as we can tell) prior to this announcement," said an analyst's report from Raymond James Ltd. on Monday.

Chinese companies have been dramatically raising their stakes in South Africa's platinum sector with several acquisitions as other companies give up. Earlier this year, South Africa suffered a devastating five-month strike by 70,000 platinum workers, the longest and costliest mining strike in the country's history. One of its biggest producers, Anglo American Platinum, put two of its biggest mines up for sale after the strike.

Despite those woes, two other Canadian companies – Ivanhoe Mines Ltd. and Platinum Group Metals Ltd. – are pushing ahead with their projects in South Africa. Last week, Ivanhoe announced that it had received final approval from the South African government for its $1.6-billion Platreef project, one of the biggest platinum projects in the world.

Both companies say that their South African projects will be highly mechanized, reducing their operating costs and cutting their vulnerability to labour unrest. Ivanhoe says its project will be the lowest-cost platinum mine in Africa when it begins production in 2020.

The decision by Eastplats to sell its platinum assets, however, was big news in South Africa. "Strapped Eastplats throws in the towel," said a front-page headline in Business Day, the country's leading business newspaper.

In earlier statements this year, Eastplats president and chief executive officer Ian Rozier cited "a number of adverse economic factors" in the South African platinum industry, including persistent labour unrest, operating cost inflation, decreasing productivity and a shortage of reliable electricity.

In his announcement of the sale to the Chinese company, Mr. Rozier said his company couldn't find enough capital in public markets to operate the mines. "The entire resource sector is under considerable pressure and PGMs [platinum group metals] have been disproportionately impacted as a result of a number of factors unique to the sector," he said in a statement.

"The capital required to advance the Eastplats assets into production is not available in the public markets at this time, and we are very encouraged by the ability of Hebei Zhongbo to deploy its resources in this regard."

Analysts at Raymond James, in their reaction on Monday, said the "surprise announcement" was "remarkably short on details." They said they had several reservations about the proposed sale. Failing to close the sale or provide further clarity on it could expose the company to litigation risk, they said.

The other Canadian platinum miners, however, are upbeat about their prospects in South Africa. Ivanhoe had threatened to cut jobs at the mining project if it didn't get approval from the government, but it scrapped that plan after receiving the approval last week.

More than $300-million (Canadian) has been invested in Platinum Group Metals' joint-venture platinum mine in South Africa, and the company has been exploring a second discovery on an extension to the northern limb of the famed Bushveld complex.

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