Ivanhoe moots low capex Platreef mine, but studies show new PGM supply is hard to deliver

TWO feasibility studies into a new, greenfields platinum group metals (PGMs) mine in South Africa highlighted the lead times and cost of adding new production to the market and provided insight into supply side risks, a bank has said.

Ivanhoe Mines has published an updated feasibility study for its Platreef project, a large, capital-intensive mine. It has also published an additional preliminary economic assessment (PEA) into a lower capex option in which production would be built gradually. In both cases, first production from the Platreef Project is not until 2024, at the earliest.

“We think this provides another example of extended time lines associated with bringing new PGM supply to market,” said RMB Morgan Stanley in a report published on December 1. Mining inflation and a requirement to sign a processing agreement with a third party, such as Impala Platinum (Implats) or Anglo American Platinum (Amplats), converting concentrate to refined metal were additional factors influencing new PGM production.

Ivanhoe Mines, which was founded and is co-chaired by Robert Friedland, the billionaire mining entrepreneur, has been bullish on the prospects for Platreef. “Given the current precious metals environment, I am confident that the pending studies will showcase the exceptional economics that one would expect from such a thick, high-grade and flat-lying deposit,” he said in July.

A 2017 feasibility study on the mine, which is situated down-dip of Amplats’ Mogalakwena open pit mine in North West province, scoped for first production in 2023. The updated feasibility study says first production would be in 2025 and would build up to a run-rate of 508,000 4E ounces a year by 2027. Pre-production and sustaining capex would total $2.05bn.

For the PEA option, however, a shaft sunk primarily for ventilation purposes would be used to access ore early, by 2024. In this version, the mine would initially produce 109,000 4E oz at capex of £390m. Full capex would be $2.1bn, however, once the mine had built up to full production.

“Although there is much information to digest, we think that as arguably the most material greenfield project currently in development but yet to produce in the industry, the high level findings are instructive for those wishing to understand the dynamics behind bringing new South African PGM supply to production and thus the likely impact of PGM market balances,” RMB Morgan Stanley analysts said.

Greenfields PGM production has been hard to come by in South Africa. Implats recently decided against investing in the Waterberg Project which is being backed by North American firm, Platinum Group Metals.

Even organic growth is slow to arrive: Amplats said it was spending more time studying options to expand Mogalakwena with more information due next year.

“There is no such thing as easy ounces, and we believe the quickest ‘early ounces’ could take at least two years to come online and will not be enough to materially change the PGM supply-demand fundamentals,” said Arnold van Graan, an analyst for Nedbank Securities in a research note in November.

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