AFRICAN Rainbow Minerals (ARM) says it may in time raise its 19.9% holding in Canada’s Surge Copper after the Berg project beat the group’s early expectations.
ARM COO Jacques van der Bijl said the group could look at ways to lift its stake beyond 20%, although this was unlikely soon. ARM’s platinum projects, including the R15.2bn build of Bokoni, will take priority.
“Surge Copper is actually surprising us on the upside compared to our original investment case and it’s looking very promising going forward,” Van der Bijl told analysts following ARM’s annual results on Friday.
ARM currently owns 19.9% of Toronto-listed Surge, which is developing the Berg copper project in British Columbia.
Moving above 20% would require ARM to make an offer to minority shareholders, Van der Bijl said.
Berg has grown since ARM first invested. Expected copper-equivalent output for the first five years has risen from 120,000 tonnes to 200,000 tons a year. But the estimated cost of building the mine has also increased to C$3.5bn from C$2.1bn.
Van der Bijl said by-products from Berg’s molybdenum, silver and gold could cover its operating costs. This would leave the mine with a negative C1 cash cost for its copper.
Surge plans to submit the project for environmental approval in the next few months, while work on a feasibility study is also under way. ARM expects this work to run over the next three years, with the environmental assessment likely to take the longest.
Funding the projects
ARM said the bulk of its funding for Berg would only come later, giving it time to spend on Bokoni and the restart of its Nkomati nickel mine.
Finance director Tsundzukani Mhlanga said ARM’s share of Berg’s development costs was expected to reach about R2.2bn in each of the 2030 and 2031 financial years, based on its current stake.
By then, ARM expects Bokoni and Nkomati to be generating cash.
The group plans to spend R15.2bn on Bokoni over seven years, with most of the money going into the mine in the first three years. Cash generated during the build is expected to cut Bokoni’s peak funding need to R10.2bn.
Nkomati will require about R1.9bn over the next two years.
ARM said it was aware of the need to spread out the projects so they did not put “undue pressure” on its balance sheet, Mhlanga said.
The diversified miner announced the Bokoni build in July. The project is expected to produce between 350,000 and 400,000 PGM ounces a year at steady state.
Modikwa turnaround
ARM also defended plans to lift output at Modikwa after an analyst asked whether the PGM mine could “stand on its own two feet” through the commodity cycle.
Acting ARM Platinum CEO Johan Jansen said a lack of underground UG2 mining areas had held back volumes. This led ARM to bring in open-cast ore as a temporary “gap filler”.
Underground development rose 28% in the past year, opening more areas for mining. ARM is also pushing declines deeper and working to lift recoveries at the concentrator.
“I’m very confident that looking at the team we have, looking at what we’ve achieved compared to what we planned, we are on the road to success at Modikwa,” Jansen said.
