excellent press for sylvania resources

Sylvania Resources Should Have A Fairly Brief, but Profitable, Life Before Aquarius Platinum Makes A Bid.

Minesite.com
Feature Story (May 17, 2004)
(http://www.minesite.com/archives/features_archive/2004/may-2004/silvania170504.htm)


The simplest schemes are often the best. In this case Sylvania Resources, an Australian listed company, has set out to treat chrome tailings and dumps from the major chrome miners in South Africa, such as Bayer and Xstrata, and produce platinum group metals. There are a number of roles that small companies can play profitably in the wake of majors and this is one of them. Aquarius Platinum, the Australian company which was such a big success when it listed in London in the mid 80s had another. It was not economic for a leading producer of PGMs such as Impala Platinum to open small mines, but it needed the PGM concentrate for its refinery. How about Aquarius Platinum being its small mining arm?

The relationship between the two companies , which started with the Kroondal mine on the Bushveld Complex, has been a huge success. Keith Liddell was managing director of Aquarius while it developed Kroondal and then went off to make his fortune by forming Mineral Securities, about which he will be talking at the Forum on Tuesday. His place was taken by Ed Nealon, the ideas man who had come up with the model for Aquarius. Hands- on management had few attractions for Ed so Stuart Murray moved across from Implats to Aquarius to run it as he could see the potential of the smaller company was larger than that of the major in proportionate terms. This left Ed free to come up with another money spinner and here it is in Sylvania. He pulls all the strings, but is not on the board and leaves most of the promotion to Melissa Sturgess-Smith who was with him at Aquarius and now runs AIM listed Dwyka Diamonds.

Ed and Melissa came up with the idea of Sylvania and set about securing tenure over a number of chrome dumps and tailings. This portfolio was assembled in close collaboration with Aquarius Platinum as the Kroondal mine is key to the success of the whole operation. The big boys like Implats and Amplats were not really interested as it came below their radar screens, but Aquarius was happy to have a plant devoted to the extraction of PGMs from chrome bolted on to its Kroondal mine plant.. The cost of extraction would then be reduced by the use of Kroondal infrastructure and the major capital expenditure involved in developing a stand-alone processing plant could be avoided. Mining costs were going to be minimal as the tailings and dumps were already at surface and had average grades of 4 g/t PGMs plus offtake agreements for the concentrate followed the Aquarius line.

Xstrata and Bayer both have chrome plants and tailings dumps and dams near enough for the waste to be pumped or lorried to Sylvanias’s flotation plant at Kroondal. Aquarius, which has a major interest in Sylvania as well as being technical developer and operator, then contributes power, water, reagents and operating staff on a commercial basis and the tailings go into the Kroondal water recovery and tailings disposal system. The PGM concentrate is then sold to Implats and Amplats and everyone is very happy. And so they should be as this formula can be repeated at the Marikana mine which Aquarius has just brought into production also on the Western Limb of the Complex and at Everest South which is being developed on the Eastern Limb.

The programme for opening the bolt-on plants runs as follows. Construction is already underway at Kroondal and production is expected to start in October with full production achieved by the end of the year. The same thing will happen at Marikana next year and at Everest South in 2006. Kroondal is scheduled to produce 20,000 ozs PGMs initially and then move on to 30,000 ozs. Operating costs will be US$170/oz in the first year, and then fall back to US$145/oz and this compares with a current PGM basket price of around US$650/oz. The sums, however, are based on a basket price of US$520/PGM oz and on a US$/Rand exchange rate of 6.50 so there is plenty of leeway built in there. Production and costs at Marikana and Everest South are expected to follow suit.

Sylvania is anticipating annualised profits from the Kroondal operation of between A$3 and A$3.5 million, once it is up and running at full capacity. By the end of 2006, therefore the company should be making profits of A$10 million subject to all the usual qualifications. It is unlikely to get that far. Aquarius will not let this small and tasty morsel get away from it once the first project at Kroondal has proved itself. Mind you it will have Sylvania by the nuts as it is the technical developer and operator of the projects as well as supplying the infrastructure so it is unlikely to encounter any counter-bids when it makes its move.