ARM lifts veil on how it aims to make money from Bokoni Platinum where others have failed

Patrice Motsepe, chairman, ARM. Photo: Getty Images

AFRICAN Rainbow Minerals (ARM) explained today how it intended to turn a profit from its newly acquired Bokoni Platinum Mines where previous owners have failed dismally.

ARM bought Bokoni, situated in the northern part of the Bushveld Complex, from Anglo American Platinum (Amplats) for R3.5bn. The acquisition price includes a R3.3bn shareholder loan provided by Amplats to its former partner in Bokoni, Atlatsa Platinum as it sought to make the mine profitable.

Mike Schmidt, CEO of ARM, said at the firm’s interim results presentation that his company’s approach in solving the Bokoni conundrum was to focus on mining Bokoni’s UG2 reef which was predominant in palladium and rhodium (57% prill split).

This would play to market demand for these metals over platinum that was mined previously from Bokoni’s Merensky reef.

There had been “a fundamental shift in the PGM market over the last five years to thrift to palladium and rhodium,” Schmidt said. The fact that the prill split of the UG2 reef was towards these metals “bodes well”, he added.

“Also the mine is well established and has the infrastructure to mine the Merensky orebody. That is optionality we will consider as prices thrift [back to platinum] some time in the future,” Schmidt said.

Mechanisation would also play a significant role in ARM’s plans for Bokoni. In terms of stoping, ARM would use narrow reef equipment which had been “tried and tested over 15 years and optimised in the past five to seven years by Amplats. “We will employ that layout and for on-reef development we will use low profile equipment,” he said.

ARM would also consider the possibility of using “pre-concentration opportunities” to remove waste and improve the grade, plant throughput and recoveries, Schmidt said. He didn’t want to criticise the previous decisions of Amplats. “We’d probably have done the same things,” Schmidt acknowledged.

“Amplats has got a world class team and Natascha [Viljoen, CEO of Amplats] is an exceptional CEO as well as Mark [Cutifani, CEO of Anglo American] and the new guy, Duncan [Wanblad, CEO-designate of Anglo American] … are great guys,” said Patrice Motsepe, executive chairman of ARM. “But the bottom line from an ARM perspective is that we have to consistently deliver results,” he said.

In addition to the purchase price, which ARM said was an upfront cash payment, the company planned to commit R5.7bn in capital expenditure to get Bokoni back on its feet.

Tsundzukani Mhlanga, CFO of ARM, said the group was considering financing options even though it had the cash to pay for the Bokoni mine. “We are currently looking at other avenues at how best to structure the acquisition price because it’s not just the acquisition price but also the development capital we need to find,” Mglanga said.