IMPALA Platinum (Implats) confirmed its intention not to take a majority position in the Waterberg JV project saying that shareholder returns and a strong balance sheet were its priorities over development of a new mine.
The South African group said in a statement today that it took a 15% foothold in the project as part of its strategy to diversify into shallow and mechanisable orebodies, but that its further participation turned on the definitive feasibility study, approved in December.
Following the completion of the study it had decided that the long-term platinum group metal (PGM) demand outlook combined with the project schedule and production ramp-up profile was not something it wanted to take on.
As per the feasibility study, the Waterberg JV was scoped for first production of some 420,000 ounces of PGMs from 2023 following investment of $874m. Implats would have been liable for half of this expense if it triggered its option to take a 50.01% stake. Full production from the project was planned for about 2027.
Implats had in October surprised the market with the immediately cash flow accretive, $758m purchase of North American Palladium, a Toronto-listed firm that operated the 237,461 oz/year Lac des Iles mine in Canada. From the get-go, this project raised questions about Implats’ appetite for the Waterberg JV.
Other factors that worked against the Waterberg JV was “… the implications of the COVID-19 pandemic on the global economic outlook, and investor financing appetite for large greenfield projects in general,” the company said.
As stated in an announcement by Platinum Group Metals (PTM) on Monday, Implats’ 50.2% partner in Waterberg JV, Implats would retain its 15% stake and continue to negotiate an offtake deal for concentrate “in good faith”.
“Costs associated with further study and optimisation work to de-risk the project implementation programme will continue to be funded by Implats, up to a maximum of R55m as previously announced, with planned studies expected to be complete by mid-August 2020,” the company said.
PTM said it had recently received interest in the Waterberg Project “… for funding and strategic off-take from other interested parties” without providing additional details. “These discussions will continue while the Call Period Program and mining right application work are ongoing,” the company said.
Implats’ effective withdrawal from future investment in Waterberg Joint Venture does present PTM with some short term liquidity problems as a non-brokered private placement of $2m arranged in June had been postponed in the wake of the news.
It also leaves the Waterberg JV’s other partners, such as Hosken Consolidated Investments (HCI) in the lurch. In August last year, HCI said it had increased its stake in PTM to 30.2% from 22.6% after taking up shares issued in terms of private placements.