The Pilanesberg....now there is a name that brings back memories of weekends away! Home to a well-stocked game reserve, this volcanic landscape in South Africa’s North West Province is an easy escape from the hustle and bustle Jo’burg. But that is not all. It is also the site of the "Pilanesberg Project", the most advanced venture of Toronto and AIM-listed platinum explorer, Platmin Limited.
The Pilanesberg Project has a total surface area of 14,511 hectares. It is estimated to contain approximately 90% of the global platinum resources in South Africa. Located in the Western limb of the so-called Bushveld complex, it is home to world’s biggest known deposits of platinum and palladium. All the major players are here — Anglo Platinum, Impala Platinum and Lonmin. Also, a little one — Platmin.
Platmin - from explorer to producer
Ninety percent of global platinum resources? Well that is good news if Platmin can actually get the platinum out the ground! But it would appear that this junior explorer has every intention of doing just that. And sooner than expected, too. The company - 22% owned by world number-three platinum producer Lonmin - recently told the world that it is determined to capitalise on the dip in platinum supply. And it expects to do so as early as next year.
The company says plant construction is underway. Commissioning is scheduled to take place in the first quarter of 2009. Production of some 250,000 ounces of PGMs is expected in 2010, with half in 2009. Come 2012 production will ramp up to some 586,000 PGM ounces per year!
Platmin will certainly need determination! Getting at the metal has not exactly been easy. Mine fatalities, labour unrest, and of course, power cuts. They have all conspired to hit production in South Africa. And we know what that has done for the metal price. We also know that South Africa’s electricity crisis not expected to be resolved any time soon. So these production levels may just be sustainable for a while.
Great news for Platmin! If it manages to pull off the Pilanesberg project, it will make the transition from explorer to producer. As Erin keeps saying, producers are safer bets. And if you must go for explorers in these uncertain times...better those on the verge of production.
Green light for project
So what exactly has changed? Well the South African Department of Minerals and Energy has granted Platmin mining rights to 85% of the four properties in the Pilanesberg project area.
In addition, the project feasibility study is now on the table and it looks "robust". That feasibility study was completed in July 2007. It showed proven and probable PGM mineral reserves (that is platinum, palladium and rhodium) of around 4.4m ounces. Some 3.2m were attributable to Platmin! Furthermore, the study used long term metal price assumptions over the 16 year life of the mine. Those were US$951 per ounce for platinum, US$299 per ounce for palladium and US$3,819 per ounce for rhodium.
With current platinum spot prices, hovering over $2,000, you can see why Platmin is keen to start sooner rather than later! It would mean that the $208m project could be cash flow positive in two-and-a-half years, says chief executive Ian Watson.
So, unsurprisingly, the board has given the green light to the project. Plant construction is now underway.
The downside... and potential upside?
Now Erin is always going on about the possible risks in South Africa. So I couldn’t resist ringing to give her the "I told you South Africa is not all bad news" line.
"Mmm, but doesn’t Platmin need $200m to develop the project?" came her response. "And if it decides to go ahead and build its own smelter, it’ll need even more cash. That might not be so easy in these uncertain times."
Okay, okay! So Platmin needs financing but it has already made a start. In November, 2007 it appointed Standard Bank in South Africa to raise the dosh. And by December it had US$91m in the coffers, of which US$75m was allocated to mine construction.
"But a mine without power is not much use!" (Another fine riposte from Erin...) Oh, she can be so negative! Well, it would appear that Platmin has its power supply under control. Mr Watson says that a 1.5 MVA Eskom line is currently supplying uninterrupted power for construction work at Pilanesberg. And even though the state electricity supplier has approved 40 MVA electrical power to the project, Platmin is not taking any chances. It has secured an alternative for 10% of its needs should thing not go according to plan — always a possibility in South Africa. The company has also budgeted for diesel generated power.
While the ideal may be for Platmin to remain an independent player, "everything has its price", Mr Watson has been heard saying. After all, Eland Platinum, also an explorer in the Bushveld Complex eventually succumbed to Xstrata, the world’s fourth largest mining group.
Certainly Platmin won’t be shying away from expansion and acquisition opportunities. And why should it! Demand for platinum group metals is not likely to abate any time soon. The rush is on.
Keep exploring! But for now stick with likely producers!
Erin and Isabel
