pla in the media

High platinum prices drive the surge of juniors
March 4, 2007

By Justin Brown

Johannesburg - Attracted by record high platinum prices, eight junior mining firms are set to invest close to R12 billion to turn their flagship projects into mines on the Bushveld, which spans North West, Limpopo and Mpumalanga.

In total these projects could produce 1.35 million ounces annually when the mines are at full production.

Since 1997, South Africa's platinum output has climbed by almost 50 percent to 5.43 million ounces last year. The country provides more than three-quarters of world annual production of platinum.

There are only nine companies involved in platinum mining in South Africa. These numbers could more than double as juniors turn their projects into mines.

Last year, Anglo Platinum (Angloplat), Impala Platinum (Implats) and Lonmin together made a net profit of more than R22 billion.

However, the junior mining firms are set to crack the iron grip that local firms have over the global platinum mining sector.

Two platinum juniors have started building their first mines. Another six emerging platinum mining firms are on the brink of building mines to meet growing demand for platinum.

Late last year, Eland Platinum started building its R1.5 billion Elandsfontein mine near Brits in North West. The second junior to start mining is Ridge Mining. Over the next 18 months the firm will be developing its Bluge Ridge project at R1.1 billion.

African Platinum (Afplats) is set to start up its R2.3 billion Leeuwkop project in North West this year. However, the firm is waiting for the department of minerals and energy to issue it with a mining permit before construction can begin.

Other juniors that may start construction of their projects either this year or next year are Platinum Australia, Nkwe Platinum, Platmin, Anooraq Resources and Canadian junior Platinum Group Metals.

The juniors explore the Bushveld where more than three-quarters of the global output of platinum each year is mined.

Platinum in Limpopo was discovered by Hans Merensky in 1924.


Away from the Bushveld, the platinum price continues to set new records. In November, platinum soared to a record $1 402.50 (R10 164) an ounce and on Friday, platinum was fixed at $1 203.

UK company Johnson Matthey estimates that world platinum consumption expanded by 5 percent last year and the forecaster expects platinum demand to rise further this year. The platinum market has been in deficit for eight years.

With the explosion in platinum juniors, the consolidation of the sector has started.

In December, Lonmin bought Canadian-listed Afriore for R3.1 billion. Afriore had a 74 percent stake in the 4 095ha Akanani project in Limpopo. Lonmin expects to spend R5 billion on developing Akanani into a 250 000 ounce a year platinum mine.

After initially offering to buy close to 30 percent in Afplats' South African projects for R1.1 billion in November, Implats announced in February it could buy out Afplats for R3.5 billion.

Implats' chief executive, David Brown, has indicated that he expects further acquisition opportunities in the junior platinum sector.

Angloplat with more than 800 million ounces of platinum group metals resource is looking to grow internally rather than buying platinum juniors. The group could run into regulatory issues if it tried to buy some of the juniors.

Wesizwe Platinum's chief executive, Michael Solomon, expects one of three scenarios to unfold. First, some of the existing players will swallow up the juniors; second, a number of the stronger juniors will start mines; and third, some of the juniors will merge with other juniors.

Some in the market say consolidation will take place as there is not enough capital available to build all the mines that the juniors are planning to build.

Analysts expect two to three platinum mining firms, producing about 500 000 ounces of platinum, to emerge to join Northam Platinum and Aquarius Platinum as mid-tier platinum producers.