Platmin mine nears completion

Brendan Ryan | Thu, 15 Oct 2009 12:19
[miningmx.com] -- PLATMIN management will decide during the present quarter to end-November on when it will declare its Pilanesberg Platinum Mine (PPM) as being in commercial production.

That’s according to Ian Watson, CEO of the JSE-listed firm, who will step down by the end of 2009. Speaking to Miningmx, Watson said: “The development of the mine is pretty much complete, and it’s time for me to move on and hand over to someone who will run the operation.”

Watson added the ramp-up to full production at PPM had been affected by recent labour unrest at the mine involving the mining contractor, but this had now been resolved.

He said: “That set us back a bit. The labour issue was all about allowing access by the National Union of Mineworkers (Num) to the workers.

“The mining contractor had a closed shop agreement with the Federated Mining Union (FMU) which prevented workers from joining Num, and it seems many of those workers wanted to join the trade union.

“This has now been sorted out through a recognition agreement between the contractor and Num.”

According to London brokers Fairfax the strike action, which lasted from August 12 to September 9, “had a serious impact on the ramp-up period which resulted in stockpiles being run down and the mine plan falling behind schedule, impacting cash flows.

“The interruption has most likely pushed back the time to being cash flow positive to early next year.

“At the end of August, the company had significant cash reserves and more recently secured a credit facility with Investec.

“However, the current strong rand is hurting platinum group metal (PGM) producers as it raises costs and we feel there is a risk that the company may require further financing if the ramp-up to the 250,000 ounce target encounters any more difficulties.”

According to Platmin’s interim report for the six months to end-August, the company had $60.9m in cash as of August 31.

PPM has so far cost R2.6bn, which includes capital expenditure and capitalised pre-production costs. Another R263m still has to be spent to complete the construction phase.

Platmin has put its other SA projects on a “reduced work programme” to focus on completion of PPM.

These include the Mphahlele, Grootboom and Loskop operations. Platmin intends spending sufficient capex on these projects to ensure preservation of new order prospecting and mining rights.

“These expenditures will be funded from existing cash on hand and, where necessary, additional funding will be raised to fund future development and exploration expenditure.”

According to Fairfax, “the Pilanesberg asset is a good project and once operating should be a low, cash-cost producer. Being open pit it is not subject to the same risks as conventional underground PGM mines.

“Platinum prices have improved significantly, assisted largely by investment money into precious metals as investors seek an inflation hedge.

“However, next year we do not anticipate strong demand from the more important industrial and auto sectors which could limit the upside.

“Longer term, the fundamentals for PGMs are attractive as producers will struggle to meet demand, especially with the expected power shortages in South Africa. That should lead to stronger prices or, if the rand weakens, producers will see cost pressures ease and growing margins.

“Consequently, we feel that Platmin and its Pilanesberg mine will be attractive to investors in the long run,” Fairfax concluded.