PlatAust offers different view of dim platinum Staff reporter, 9...

PlatAust offers different view of dim platinum
Staff reporter, 9 November 2009
PLATINUM Australia has got off to a bit of a rocky start at its Smokey Hills operation in South Africa, but with issues resolved and a likely steady stream of positive news flow in the pipeline, the company’s market prospects are looking up. Moreover, it’s well positioned in what is an exceeding tough sector in the mining world.

That’s the assessment of resource company investment firm Argonaut, which this week was telling clients platinum mining was arguably the toughest game in the resources sector.

“Approximately 75% of global supply is sourced from deep, capital intensive narrow reef mines on South Africa’s Bushveld Complex,” Argonaut pointed out. “Decreasing productivity, increasing costs and a rampaging rand have compressed margins to the point that at least 15% of the industry is underwater. The economics are unlikely to improve with mines getting deeper. The average shaft depth is expected to increase from the current 820m to 1050m over the next 10 years.”

In contrast, PlatAust has targeted shallower operations with consequent lower costs and shorter lead times to production.

The strategy is being reflected in the first instance at Smokey Hills where the company’s $US45 million project is located on the Eastern Limb of the Bushveld Complex – where 6km of UG2 reef outcrops around the margins of two adjacent hills. A second project is also emerging with prefeasibility numbers released last month for Stage 1 of the openpit Kalplats project in the Kraaipan greenstone belt. As noted by Argonaut, parameters include a $US91 million capital cost, 1.5Mtpa plant, about 115,000oz pa PGM output from 2011, and $US340/oz operating costs (to concentrate). A bankable feasibility study is expected to be completed in early 2010.

PlatAust’s third project is Rooderand on the Western Limb, where it can acquire up to a 70% interest in a project, which has an inferred resource of 3Moz 4E PGM in the UG2 and Merensky Reefs, from surface to about 500m depth.

“Although a slower-than-expected ramp-up at Smokey Hills has delayed positive cash flow, PlatAust’s prudent strategy is poised to deliver maiden returns,” Argonaut said. “With engineering issues in the Smokey Hills plant now rectified, cash flow positive status is imminent, and metal production is on track to hit 95,000ozpa from the March quarter 2010.

“If PlatAust can make good on promises of sub $US400/oz operating costs, and prove it can fund Kalplats and Rooderand out of internal cash flows it will command a re-rating.”

PlatAust was this week capitalised at just under $A300 million.