SOUTHERN Palladium on Thursday said it had decided to develop its 70% owned platinum group metals project Bengwenyama in two stages as financing in terms of last year’s prefeasibility study proved to be “challenging”.
The project, which is situated on the Eastern Limb of the Bushveld Complex, will have a first stage production of about 200,000 ounces of PGMs in concentrate. This would require peak funding of $279m.
This compares to the $452m peak funding set out in terms of Southern Palladium’s October prefeasibility report which envisaged a single stage project averaging 400,000 oz/year over about 20 years.
Southern Palladium CEO Johan Odendaal said his board had taken “pragmatic and value-driven” decision to optimise the prefeasibility study (PFS). It also follows a visit to potential backers in the North American market where the project was shopped last year.
Other benefits from a phased project is that Southern Palladium could assess the geology on an ongoing basis and time expansion of the project in lockstep with infrastructural developments. Said Odendaal: “While the full-scale design outlined in the original PFS remains technically and economically compelling, the substantial upfront capital required could pose a funding challenge”.
Project level net present value after tax and on a 100% basis for the project in terms of the optimised prefeasibility study has been estimated at $857m with an internal rate of return of 26.4%. Southern Palladium has assumed a basket price of $1,557 6E/oz for Bengwenyama. The current basket price of $1,662/6Eoz.
Southern Palladium’s optimised study comes amid a turn in the PGM cycle after roughly two years in which the metal prices troughed. The platinum price is nearly 53% stronger year-to-date while palladium is 27% higher.
Shares in Southern Palladium responded positively to the update on the Australian Securities Exchange where the company is principally listed, gaining nearly 7%. On the JSE, however, the stock was marginally down.
Odendaal said there was a lack of liquidity in Johannesburg. The implied price for its share on the JSE, where Southern Palladium has a secondary inward listing, is closer t R7/share, he added.
The next step for Southern Palladium is a definitive feasibility study, but a near term catalyst was the grant of a mining right for the project, which is anticipated. As per the firm’s stated plans, a final investment decision is expected in mid-2026, roughly six months after publication of a bankable feasibility study. First ground is set to be broken in 2027.
Odendaal said while it was difficult to predict where PGM prices would be at that stage, declining supply would support average pricing.
Automotive demand from both the hybrid electric sector and traditional internal combustion engines would also assist the market. World growth, however, was the final arbiter. “We are often promised this but it hasn’t happened lately. Hopefully that will change,” he said.
