ARM says in talks to buy Amplats’ Bokoni as PGM sector gets another consolidation push

IN the latest consolidation move for the South African platinum industry, African Rainbow Minerals (ARM) has announced it is in discussions over the potential acquisition of the mothballed Bokoni platinum mine.

Bokoni is located on the north-eastern limb of the platinum-bearing Bushveld geological formation where ARM operates the Modikwa and Two Rivers platinum mines.

An ARM statement released to the JSE today said: “There is no certainty that the transaction will be concluded”. ARM’s executive chairman, Patrice Motsepe, hinted at the group’s year-end results presentation in September that the company was assessing its growth options.

Analysts have since speculated whether this could involve the spin-out of its PGM assets provided the business unit had critical mass.

The Bokoni mine – which began life as the former Lebowa Platinum some 20 years ago when it was developed as part of a major expansion programme by Anglo American Platinum (Amplats) – is owned by Amplats and Canadian junior Atlatsa Resources, but has been on care and maintenance for several years

It was one of the first black economic empowerment schemes undertaken by Amplats but has been a financial and operating disaster. Amplats has had to repeatedly come to the financial rescue of the operating BEE company Atlatsa – formerly known as Anooraq Resources.

The market view was that Anooraq had Amplats over a barrel because Amplats needed the Bokoni mine to maintain its black economic empowerment credentials, but the cost eventually became too great for Amplats to continue taking.

Lebowa Platinum under Amplats’ management struggled with its operations sitting near the top of the industry cost curve because of  difficult mining conditions.

When the former Anooraq took over the mine in 2009 their executives reckoned the problems with the mining operations lay with Amplats management and they were confident they could bring those costs down through a revised mining approach.

They were subsequently proven to be wrong in that assessment as Bokoni’s costs remained high and the mine lost increasing amounts of money as the platinum market turned down.

ARM’s potential deal with Amplats adds to recent consolidation of the South African PGMs sector after Impala Platinum announced earlier this week it was interested in buying Royal Bafokeng Platinum.

This follows the purchase of Lonmin by Sibanye-Stillwater about two years ago.