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Atlatsa Resources
Precious Metals  
16 August 2016

Atlatsa to shut opencast mine, continues to restructure Bokoni mine

In light of challenges faced at Atlatsa Resources' Klipfontein opencast operation, a decision has been taken to terminate the opencast operation by the end of 2016.

As part of South African BEE platinum miner Atlatsa Resources' operating and financial results for the three months ended 30 June 2016, the firm reported that its Klipfontein Merensky opencast operation has been affected by a number of challenges including delays in obtaining a water use licence, which resulted in the company's move to shut the operation before year-end.

Other issues that Atlatsa Resources also faced at the operation included stoppages at the eastern pit due to community disruptions and intersection of a large number of potholes on the western portion of the pit, which together, impacted the operation’s ability to deliver sufficient volumes to generate a profit.

Due to these issues preventing the opencast operation from reaching planned production levels, a review of the operation was undertaken during the first half of 2016.

The result of this review was that on the 28 June 2016, a decision was made to terminate the Klipfontein Merensky opencast operation by the end of 2016.

Bokoni mine restructure update

To ensure the future sustainability of Bokoni mine, on 16 September 2015 Atlatsa Resources announced implementation of an operational and financial restructure plan at its Bokoni mine.

The primary objective of the restructure plan is to enable Bokoni mine to endure a prolonged period of depressed PGM commodity prices by reducing its existing cost structure and increasing production volumes of higher grade ore from underground operations.

In line with this, the Bokoni mine labour complement was reduced by 35.8% from 6 342 as at 30 June 2015 to 4 074 as from 30 June 2016 and the reduction is made up of a 57.6% decrease in contractors and an 18.6% decrease in own mine employees.

Minimising cash losses and containing costs remains a key performance area for Atlatsa. To date, on a base cost calculated from August 2015, operational costs have reduced by 13% on average per month, which was achieved by a significant reduction in the labour force.

The older, high cost UM2 and Vertical Merensky shaft operations were placed on care and maintenance in August and December 2015, respectively.

Although overall tons delivered and 4E ounces produced at Bokoni mine decreased, underground tonnes delivered and 4E ounces produced increased by 20% and 24%, respectively.

This highlights the positive trajectory from the two remaining new generation shafts that are still in development.

Atlatsa Resources CEO Harold Motaung says “Bokoni mine remains an operation in development with its key Brakfontein Merensky and Middelpunt Hill UG2 underground development shafts in their ramp-up phase.

"The effects of our Restructure plan are starting to yield positive results with a much improved cost performance at the operation, coupled with an improved safety performance," he adds.

The implementation of the restructure plan remains a work in progress, resulting in certain operational challenges that include skills mix and re-training requirements among our labour force, all of which has had a negative impact on planned development at the company's ramp-up projects.

Amendment on Amplats term loan facility agreement

On 15 August 2016, the term loan facility agreement entered into with platinum miner Anglo American Platinum on 9 December 2015 was amended and restated to allow Anglo Platinum to advance an additional R193 million to Atlatsa.

The loan will enable Atlatsa to fund its share of operating expenses, working capital expenditure and capital expenditure costs at Bokoni mine in the event that these costs cannot be funded from Bokoni mine cash flows.

The terms and conditions to utilisation of the additional R193 million term loan facility include Atlatsa co-operating with Anglo Platinum in relation to Anglo Platinum’s acquisition of the prospecting rights held by Kwanda Platinum Mines, including the prospecting rights in respect of the Central Block mineral properties held by Plateau Resources and renewal applications applicable to the prospecting rights being granted by the Department of Mineral Resources.

The term loan facility is repayable at the earlier of an event of default and 31 December 2018.

There will be a mandatory repayment by Atlatsa upon the occurrence of a change of control in the company or a sale of all or substantially all the assets of Bokoni mine whether in a single transaction or a series of related transactions.

Second quarter operational results

Bokoni mine tons delivered to the concentrator during the second quarter of 2016 decreased by 16.1% to 340 758 t, with tons milled also decreasing by 11.9% to 344 895 t.

The resulted in production of 41 698 oz 4E PGM compared to 45 675 oz 4E PGM  produced during the corresponding quarter in 2015.

Primary development at Bokoni decreased by 32.4% quarter-on-quarter to 1 258 m as a result of the restructure plan, which has had a negative impact on planned development and resulted in a delay in primary development during the first half of 2016 relative to plan at Bokoni mine.

More emphasis has been placed on secondary development to increase face length available for mining, although development at Bokoni mine is expected to be sufficient to meet the requirements of the approved restructure plan.

Recoveries at the concentrator plant remained relatively flat at 87.5% for the Merensky concentrate and 86.3% for the UG2 concentrate.

The opencast concentrate recoveries increased by 7.6% to 70.5% during the period under review.

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