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Eastplats to unveil smelter in 2008 Posted: Thu, 12 Jul 2007 [miningmx.com] -- EASTERN Platinum (Eastplats) will decide next year what size smelter it will operate at its Crocodile River project, the first smelter independent of the Anglo Platinum-Impala Platinum-Lonmin triumvirate. It could offer junior mining producers an alternative to unfavourable contracts. A common theme running through an Investec junior platinum miners’ conference in Cape Town was the concern about the smelting capacity in South Africa, especially in five or six year’s time when the majors complete expansions and juniors bring projects into production. Not only was capacity an issue, but also the margin extracted by the majors for their smelting services. Wesizwe Platinum CEO, Mike Solomon, said the margin runs at between 17% and 23%, adding the political landscape of relationships between small producers and those with smelters would change once an independent smelter was in operation. Platinum Group Metals president Mike Jones said: “The companies running the smelters give you a real haircut. In my next life I want to come back as a smelter (operator).” There are arguments for and against the majors dominating the smelting business. On one side, it has enabled junior producers to bring deposits into production without having to tackle the massive expense and technical challenges of building and operating such plants. The technical problems can't be underestimated as Lonmin, the world's number three platinum producer, will attest. It has had ongoing difficulties. The counter-argument is that smaller producers become little more than contract miners for the majors and that in some cases the contract terms are onerous. Terry McConnachie, CEO of Sylvania Resources, said: “There’s a capacity crunch coming for the smelters.” Eastern Platinum, which took over Barplats, inherited an unused smelter that was built when the Crocodile River project was built by Loucas Paroulis and subsequently taken over by Impala Platinum. “Everyone else is $350m and three to four years away from a smelter. We are 18 months and $75m away. It was time for us to come out of the closet on our smelter,” Eastern Platinum CEO Ian Rozier told Miningmx. A study into the smelter and the market is underway at the company and a decision will be taken in March 2008 whether it will be a small or large operator, with Rozier favouring the larger option. The smelter has a design capacity of 250,000 oz of matte but this could be increased to 600,000 oz. The plant is 80% complete. The smelter will give Eastern Platinum options if and when the capacity crunch arrives. “We’ve got five years of good times left and then we’ll reach crunch time with smelters. This smelter will give us the option not to be squeezed on offtake contracts or we could treat other companies’ material,” Rozier said. Eastern Platinum is “very happy” with its life-of-mine offtake agreement with Impala Platinum, he said. “It’s a very good contract and I wouldn’t chuck it away.” The TSX and JSE-listed company has two other projects on the Eastern Limb of the Bushveld Igneous Complex, which will contribute towards the production target of 460,000 oz of platinum group metals in 2010. Click Here to subscribe to our daily newsletter
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