SA’s latest PGM mine doesn’t inspire confidence

SOUTH Africa’s platinum group metals sector may be battening down the hatches while prices languish but new production is coming on stream nonetheless. Canada’s IvanPlats will commission just over 100,000 ounces of PGMs this year. More production is due from Eastern Platinum.

Eastplats hasn’t officially communicated how many ounces of concentrate it will produce from the reopening of Zandfontein, a section of the underground Crocodile River mine on the western half of the Bushveld Complex, host to most of South Africa’s PGMs. But it estimates about 80% of its revenue will be from PGMs this year.

Commenting in a letter to shareholders on Tuesday, CEO Wanjin Yang said his company will target high grade PGM ounces and metallurgical grade chrome by-products within the Zandfontein section amounting to production of PGM-bearing ore of 40,000 tons per month by the year-end.

Once this ‘soft restart’ is concluded, the company will target up to 70,000 tons of PGM ore a month by the end of next year and reach a steady-state of 70,000 to 80,000 tons monthly in 2026.

Until now Eastplats has been retreating the Zandfontein surface tailings for its chrome. Yang estimates revenue for 2023 was $100m. No mention in the letter is made of profit-making, either for the chrome or potential PGM profits this year.

Crocodile River has a long and varied history in which it owners have struggled during market downcycles. It’s unclear what’s different this time under the new backers which has Ka An Development Company has a 10%+ shareholder. Eastplats isn’t a great communicator. For instance, Yang in his letter effectively brushed aside a legal claim launched by a minority shareholder in April last year alleging that a related party had illicitly sold chrome at half then market prices.

Whistleblower allegations were found to be “unsubstantiated” by a ‘special committee’ established by the company to look into the allegations, said Yang.

Chrome sales were conducted “within a reasonable range of market price, particularly in the challenging circumstances Eastplats faced in the latter half of 2022, and taking into account delivery terms and the grade of chrome concentrate,” Yang said of the committee’s findings. Without sales specifics a “reasonable range” gives the company a wide berth.

After years of development, another of China’s PGM investments in South Africa, Wesizwe Platinum announced it was closing its doors at the Bakubung mine citing mining difficulties and pressure from the PGM market. Employee protests were a feature of its last two years of operation, the details of which are sketchy at best.

Yang said Eastplats had “not been affected” by last year’s PGM market owing to its chrome production. The cautious phasing of the Zandfontein underground project would stand it in good stead this year as it ramps up. Time will tell.