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CHAIRMANS REPORT 2005
The Annual Report is an appropriate place to restate Platinum Australia’s strategy, review the Company’s progress and outline our prospects for the year ahead.
Platinum Australia’s (PLA) principal aim is to become a significant and profitable platinum group metal (PGM) producer. With the continuing demand for PGM in catalytic converters and in new expanding technologies and jewellery, we are confident that PGMs have a sound future. Platinum prices have been trending upwards and reached US$900 per ounce (oz) in August 2005.
To achieve our aim, the Company’s strategies in order of priority are:
• To acquire and develop advanced PGM deposits in South Africa • To study the potential for development of our Panton Project in Australia • To maintain a modest exploration effort focused on open pit prospects
As a result of legislative changes in South Africa’s mining industry, a number of advanced PGM exploration projects with established resources became available in 2004.
PLA has focused its acquisition efforts on projects with high grades which could be mined at relatively low cost. In order of preference, the Company investigated open pit projects, shallow underground decline operations, or deeper underground orebodies suitable for mechanized mining methods.
This is a key difference between PLA’s approach to development and the traditional approach in South Africa, where almost all PGM production comes from narrow orebodies deep underground where costs are high and mechanisation is difficult to apply.
I am pleased to report that PLA has completed the acquisition of the advanced Smokey Hills and Kalahari PGM projects, raised funds for the first stage of development and begun work on both projects. Smokey Hills and Kalahari are high grade and subject to feasibility studies and are both suitable for initial open pit mining.
At Smokey Hills, resource-delineation drilling began in July 2005 as the first part of a feasibility study to develop the project to production. The project is adjacent to two PGM mines in the Bushveld Complex, which is host to some 75% of the world’s current platinum production.
The PGM bearing UG2 reef at Smokey Hills outcrops extensively and initial sampling and drilling to date indicates a target resource of one million ounces of 4E PGM (platinum plus palladium plus rhodium plus gold) at a grade around 8.75 grams 4E PGM per tonne.
The deposit is at shallow depth and it is likely that about 25% will be amenable to open pit mining, with the remainder able to be mined as a shallow underground decline operation.
Subject to the feasibility studies, open pit mining could start in less than 12 months with ore being delivered to a nearby plant for toll treatment. This will generate early cash flow and ease our external fund raising requirements.
At the same time, construction of PLA’s own plant is expected to start and be completed within about 12 months; PLA would then be in a position to begin processing ore, leading to a significant increase in revenue to the company. Assuming the resource is confirmed, a platinum price of US$700/oz and PLA’s share of the project at 64%, preliminary studies suggest a robust project producing about 95,000 ozs PGM per annum with PLA’s share of pre-tax cash flow at around $20 million per annum.
At the Kalahari Platinum Project (“Kalplats”) PLA can earn a 49% interest by providing its Panton Process free of charge to the project and managing and funding a feasibility study. The study will be aimed at constructing a project able to produce about 200,000 ozs 3E PGM (platinum plus palladium plus gold) from a large scale open pit operation.
Kalplats is an exciting project with an established JORC-compliant Indicated plus Inferred Resource of 3.4 million ozs of 3E PGM, including 1.4 million ozs of high grade in wide zones amenable to open pit mining. We believe there is potential to more than double the high grade open pit resource by drilling along strike and down-dip of the known deposits. There is also potential to define a substantial underground resource by deeper drilling. Work at Kalplats has started with a high resolution airborne magnetic survey, now been completed and interpreted. This survey will be invaluable for drill planning as the high grade mineralization is highly magnetic.
The initial drilling program is expected to start in the second quarter of the 2005/2006 financial year and is designed to extend and firm-up known resources for a preliminary feasibility study expected to be completed in about 10 months from the start of drilling. This study will determine the scale of proposed operations and lead directly to a bankable feasibility study anticipated to be completed in early 2007. If successful, financing and construction would start within a few months and production of concentrate is anticipated in early 2008.
Successful completion of these two projects would see PLA become a significant midtier PGM producer.
PLA is continuing to investigate the potential for development of its 100% owned Panton platinum-palladium project in the Kimberley region of Western Australia. High platinum prices have improved the economics of the project which remains the largest and highest grade PGM deposit known in Australia.
PLA has recently acquired two exploration projects. The 24 Rivers Project on the North Limb of the Bushveld Complex in South Africa, is a low cost grass-roots project, targeting potential open pit Platreef over some two kilometres of strike south of the major PPRust mine, the biggest open pit platinum mine in the world. Soil sampling has been completed and drilling is planned later in the year.
The second exploration project is the Katanning Project in Western Australia. It is a grass roots project targeting Kalplats look-alike geology with anomalous platinum geochemistry in soils and rocks. Geophysical and geochemical work is planned.
PLA has been very successful with its acquisitions and is entering an exciting phase, with sequential feasibility studies and potential development of two PGM projects.
Our success has generated a requirement for funds for the feasibility studies and we are confident that the quality of the projects and our management team will enable us to raise those funds and to proceed to project financing.
I would like to thank our Managing Director, John Lewins and his capable staff for their outstanding efforts this year. Our board of Directors and Company Secretary have done a fine job and I thank our shareholders for their support during the year.
PD ALLCHURCH Chairman
PLA Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
