ARM buys the Bokoni platinum mine for R3.5bn and plans a radical transformation

Patrice Motsepe, executive chairman, African Rainbow Minerals

African Rainbow Minerals (ARM) is to buy the failed Bokoni platinum mine from Anglo American Platinum (Amplats) and Atlatsa Resources for R3.5bn in cash and plans to spend a further R5.3bn over the next three years in developing the operation.

Bokoni – which originally started operations in 1969 – was previously known as Lebowa Platinum when expanded some 20 years ago by Amplats and was one of the first major black economic empowerment (BEE) deals to be implemented by Amplats in 2007.

The mine was an operational failure because of difficult mining conditions causing persistently high operating costs under both the management of Amplats and subsequently BEE operator Anooraq Resources which was renamed Atlatsa.

It was placed on care and maintenance in 2017 during the severe downturn in the platinum market after Amplats management declined to keep bailing out Atlatsa financially.

A statement published today by ARM indicates the group is buying Bokoni because of the size of the mine’s platinum group metals (pgm) resource and the fact that it is a “natural fit” with ARM’s other platinum operations on the Eastern Limb of the Bushveld Complex which are the Modikwa and Two Rivers mines.

ARM intends developing a new mine focussed on the UG2 reef where previous operations at Bokoni had concentrated on the Merensky Reef.

Plans are to use fully-mechanised mining methods targeting predominantly on-reef development which will exploit higher grade mining areas with better ground conditions.

According to ARM the new mine plan “is expected to position Bokoni in the bottom half of the pgm cost curve” because the operation will be relatively shallow to a depth of 600m and will provide for “potential scale benefits and opportunities for operational optimisation given its proximity to ARM’s other eastern limb pgm operations.”

ARM chairman Patrice Motsepe commented, “the acquisition and development of Bokoni Platinum Mines will enable us to scale our pgm portfolio, improve ARM’s global competitiveness and allow us to pursue further value accretive organic growth.”

When the news broke in October that ARM was in discussions over the possible acquisition of Bokoni speculation amongst some analysts was that this could lead to an eventual spin-out of ARM’s platinum division as a separate listed company.

The ARM statement said the group would pay the R3.5bn from its own cash resources and also stressed the huge size of the Bokoni resource saying it was the “second largest pgm resource in South Africa” with measured, indicated and inferred resources totalling 153m oz of pgm at a grade of 5.87g/t.

ARM added that Bokoni’s measured resource amounted to 55m oz of pgm at a grade of 5.92g/t of which the UG2 reef accounted for 41m oz at a grade of 6.43g/t.

ARM says the acquisition will position the group as a “significant” global primary pgm producer targeting in excess of 1.2m oz of pgm (on a 100% basis) annually and 650,000oz of pgm (on an attributable basis) by 2026.

The deal includes a contract for ARM to sell the concentrate produced by Bokoni to Amplats for a period of 23 years starting from first concentrate delivery from the mine.