PTM to slash jobs, downscale output as clock ticks on Maseve

PLATINUM Group Metals (PTM), the Toronto-listed mining company, is to reduce the production target of its Maseve mine in a restructuring that will affect a “large” number of employees and contractors.

It also appears that the company has about four months to make a new mining plan work in terms of a waiver provided by its lenders on working capital and production covenants.

The company said in a statement on Saturday morning (CAT) that it would change its primary mining method at Maseve which has under-performed since it was commissioned in 2016.

In April, PTM downgraded the year’s production target from Maseve to 85,000 ounces of platinum, palladium, rhodium and gold – collectively known as 4E – down from the 100,000 oz previously forecast in January for the year.

Maseve, which is about 35km north of Rustenburg in South Africa’s North West province, was designed for output of 250,000 oz 4E. Output was forecast to be 110,000 oz in its first year rising to 180,000 oz, but it has far undershot that ambition which has put PTM under financial pressure.

On June 29, PTM said it would raise $20m through the issue of convertible notes making a total of $65m it has raised in three funding deals so far this year.

PTM said in today’s announcement that it envisaged a more gradual ramp up in production using hybrid mining methods in which it would mix mechanized mining with conventional stoping methods which it said had been set down in the feasibility study for the mine.

This was owing to “excess dilution” which resulted in lower than planned grades being delivered to the plant. Face grades had met expectations while the plant had performed beyond its design criteria, said PTM.

“As a result of the anticipated restructuring process, there are a large number of employees in the service of independent contractors and staff of Maseve could be affected,” it said. The Department of Mineral Resources (DMR) had been informed of the planned changes to staff, some of whom might be redeployed, PTM said.

The news will come as a body blow to the DMR which is already absorbing a potential job loss of some 8,500 people employed at AngloGold Ashanti’s TauTona and Mponeng mines following a restructuring announcement on June 28.

“We see good potential for a sustainable mine at Maseve. The South African government and the local community have been very supportive of the Maseve Mine, and we deeply value their assistance and support,” said Michael Jones, CEO of PTM.

“The Maseve Mine has good potential in terms of grades, underground developed access, completed infrastructure and a mill that operates in accordance with design criteria,” the company said. New production guidance would be assessed with an operational update set to be made “in coming months”.

For the time being, it appears PTM has just under four months to make the plan work as lenders had waived working capital and production covenants until October 31. “The company will assess the new plan’s ability to meet the lending covenants and loan requirements in the months ahead,” it said.

Further financing in debt, equity or from asset sales may be possible while PTM continued to work with BMO Capital Markets and Macquarie Capital “to review and assess corporate and asset level strategic alternatives”.

Miningmx reported in May that it had asked Anglo American Platinum (Amplats) for an indicative bid for Maseve. It is thought Amplats was only interested in using Maseve’s infrastructure. Maseve also borders Royal Bafokeng Platinum which may be interested in making some kind of bid for the mine or infrastructure.

5 COMMENTS

  1. Next story will be that Sibanye is closing shafts at the Aquarius and Rustenburg operations. Those clowns were quick to say how they will save costs and make improvements. Reality is however that they merely succeeded in messing everything up. They cannot run those mines. No expertise left.

    • I agree fully with Jack. Because of affirmative action all of the experienced managers and engineers have left for (much more lucrative) careers outside of South Africa. People are put into jobs that they are incompetent to do due to a lack of experience, but because of the colour of their skin. Those who could not even make it DESPITE the huge advantage the colour of their skin gives them (because they are basically illeterate) have become inspectors of mines, hell bent on taking revenge on those who (in their very limited understanding of life in general) are responsible for them not being GMs and driving shiny Mercedes Benz’s. Experienced miners know that there are very few opportunities on an operating mine to reduce costs in real terms. Basically the only way is to increase output (ounces) by improving efficiencies (unfortunately you need to be at least semi-literate to understand the concept) or improving the grade thriygh the mill. Because you cannot change the orebody and put more gradein it, the only way is to high grade, thereby shortening the life of the mine. What Neil and Sibanye for some reason misunderstood is that, unlike the VCR and Carbon leader reefs (gold) which is extremely variable in grade from one area to the next, the Merensky and UG 2 is of similar grade for huge areas, therfore it is extremely difficult if not impossible to increase the grade on a single operation by high grading. I think Neal was (maybe even still is) betting on an increased PGM prices. Anyway, between the Zuptas, Zwanes, affirmative action and BBBBBBEEE (I am not sure how many Bs end Es should be included these days) the industry is doomed…

  2. MikeMM, I agree totally, Any business that does not make money has no business being in business. If a business cannot be restructured or revitalized, it has to close down because it is destroying capital that can be allocated to other, sustainable business. This communist notion that mines should not be allowed to be operated as businesses but as suppliers of jobs, is not sustainable. A mine is a business just like any other. I personally do not believe that closing down unprofitable ounces will have any positive effect on either the PGM or gold prices, but that is just my opinion. What is relevant to this discussion is that the capital can and must be invested where it can create wealth for investors and as a byproduct, jobs for people in whatever country that business happens to be. The prime objective of business can and never will be to create jobs. That is why it is important to have people in government understand that by making capitalists wealthier by creating a business friendly environment is the ONLY way to create jobs for the people who voted them into power as well as broadening the tax base thereby increasing tax revenues. Punishing the wealthy can never work because they get in a first class cabin and leave, along with their capital and business acumen.

  3. Unfortunately the geology of this particular area is complex. Experienced and respected Bushveld geologists have known this for a very long time, to my knowledge. Not hard to see why. Maseve is very close to the Pilanesberg Pipe. This feature, which hosts Sun City and a large game reserve, was a massive, subsequent, volcanic intrusion that punched through the formations that hosts the platiniferous ores mined in the Rustenburg region. It will be interesting to see if Maseve can survive in the current rand PGM price environment, particularly at a reduced volume. The proportion of costs that are fixed is high in an underground platinum mine of this type – probably at least 50%, so reducing volume risks higher unit costs and, in turn, squeezed margins.

    It will be interesting to see what shareholders do if the mine fails. Some might argue that they have been badly misled by management. In any event, what this highlights for me is the danger of tackling relatively low quality orebodies in a commodity whose outlook is becoming less clear with every year that passes. Lest we forget, the bulk of platinum and palladium is used to clean up exhaust emissions from internal combustion engines. It may be fair to say that many industry “experts” continue to be “surprised” by the pace of movement towards electric vehicles. Based on the history of transportation they shouldn’t be, in my view.

    PTM aside, it’s my view that there’s much more pain to come for the platinum miners. I believe at least another million ounces of annual platinum production will need to be cut, and soon, to give rise to any meaningful recovery in the platinum price. And that recovery may still be a couple of years away in any case.

    And then there’s the government’s approach towards the mining industry….

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