Eastern Platinum Limited (Eastplats) has development plans in place for three projects which will more than double the company’s PGM output to around 500,000 ounces a year.
Managing director Wayne Robinson says that initially this programme would cost in the vicinity of R1.7 billion, and would be expanded ultimately to a fourth phase which would enable the company to break through the 600,000 ounce a year barrier.
Based in Vancouver and listed on the Toronto Stock Exchange, AIM and the JSE, Eastplats has four primary assets: the Crocodile River mine on the western limb of the Bushveld Complex; and the Spitzkop, Mareesburg and Kennedy’s Vale projects on the eastern limb.
Crocodile River Mine (CRM) comprises four mining sections: Maroelabult and Zandfontein, both of which are operating; Crocette, which is under development; and Kareespruit, which is to be developed in the future.
“Our two current producing operations, Zandfontein and Maroelabult, were responsible for a total of just over 130,000 PGM ounces in 2009, and we are probably looking at close on 150,000 for this year,” Robinson says. “This is with a reasonably fixed overhead cost, so we would expect unit costs to come down,” he adds.
“We did a lot of the surface preparation for the Crocette project in 2008. We reinitiated development towards the end of the first quarter of 2010, continuing development in the two declines, one of which has already struck reef – so that project is on the go. That will give us some organic growth at the tail end of this year, while the rest of the growth for 2010 will be coming from increased production at Zandfontein.
“We are looking at spending about R60 million on Crocette this year, and some R100 million in 2011,” Robinson estimates.
“Crocette will build up to full production by 2013, and then we would be doing about 210,000 ounces a year from CRM. Zandfontein, which is currently running at about 85,000 to 90,000 tonnes per month (tpm), will be doing 100,000 tpm by the end of the year; Maroelabult, will continue operating at 35,000 tpm; and then by 2013 we’ll have Crocette producing 40,000 tpm. That total of 175,000 tpm in 2013 represents an increase of 46% on current production of 120,000 tpm,” he explains.
The fourth mining section at CRM is Kareespruit, which does not come into the picture at this stage. “This project is much further ahead. Basically it would be a new standalone mine, and we have done little planning at this early stage,” Robinson says. “We have done quite a bit of drilling in the Kareespruit and deeper CRM area, and it just increasingly confirmed our positive expectations.”
Eastplats prioritised its development projects based on risk and return, looking at the capital cost of implementation, operating costs, and time to first production, which means that after Crocette it would look to development of the eastern limb, and that would involve a phased approach to Mareesburg, Spitzkop, DGV and Kennedy’s Vale.
“If you look at the Mareesburg orebody, it is at surface, so it involves low initial capital and very quick time to production, and the next phase would be Spitzkop. That’s where our growth will come from after Crocette,” Robinson reveals.
Mareesburg has a 1.7 million ounces resource and Spitzkop stands at 11 million ounces. This means that Mareesburg has a life of mine of about five years, while Spitzkop, Crocette and Zandfontein can stretch to in excess of 20 years, although going deeper will mean further investment.
“An increase in annual production to 325,000 ounces a year will be achieved by developing the Mareesburg open-pit mine and building a new 90,000 tpm concentrator to be located on the Kennedy’s Vale site,” Robinson states. “As the Mareesburg open-pit is depleted, the production level from the eastern limb will be supplemented and increased to 135,000 ounces a year with the development of the Spitzkop underground mine.”
He points out that additional future production of 30,000 ounces a year will be available from the development of the Mareesburg underground mine, with the DGV deposit having the potential to produce an additional 120,000 ounces a year of PGMs.
“Eastplats plans to take a phased approach to development of its eastern limb projects as this will mitigate the risks associated with multiple new mines and a new processing facility being under construction at the same time, and optimising capital requirements,” Robinson explains. “Should market conditions permit, the company has the flexibility to immediately initiate the proposed production build-up at the Spitzkop, Mareesburg, DGV and Kennedy’s Vale underground mines after the construction of the Kennedy’s Vale concentrator is complete,” he says.
“A key factor in the development of the eastern limb is that we will have to build a concentrator on the Kennedy’s Vale property. That’s going to take us a year, and it will cost around R1 billion for a capacity of 90,000 tpm,” he explains.
Phase 1 will be the development of the Mareesburg open-pit mine to feed the concentrator. “The planned production ramp up from the open pit will be rapid to allow the mill to operate at full capacity from commissioning. To accommodate potential future capacity increases, the plant will include the civil and other surface infrastructure work required for an additional 90,000 tpm processing stream and appropriate tailings facility infrastructure to process up to 180,000 tpm of ore.
“The capital cost for Phase 1 is estimated to be US$227 million, and will produce about 115,000 ounces a year of PGMs. Phase 1 build out will take about 18 months from approval to proceed, and will have a five year mine life, during which time the Spitzkop mine will be developed,” Robinson continues.
The Phase 1 capital cost estimate includes the cost of electrical infrastructure so that Eskom can guarantee the provision of sufficient power for the processing plant at Kennedy’s Vale to handle the mining and processing of up to 180,000 tpm of ore.
Phase 2 will be the construction of the Spitzkop mine to supplement and subsequently replace the Mareesburg open-pit production. “The capital cost for Phase 2 is estimated to be some US$98 million and it will produce 135,000 ounces a year,” Robinson says.
"With Spitzkop we started the project in 2008, did a lot of the surface preparation, put up temporary offices, and developed two declines to a depth of about 100 m. A lot of the initial mining preparation has happened already. The initial earthworks at the concentrator area has already been completed. Also, when we stopped the Spitzkop project we already had the long-lead items procured, so we have the mills and crushers,” he confirms.
Phase 3 will entail the development of the underground mines at Mareesburg and DGV, which has a measured resource in the UG2 reef alone containing 4.8 million PGM ounces with grades of 5.2 g/t 4E.
“Kennedy’s Vale would be the fourth phase after Mareesburg, Spitzkop and DGV.” Robinson says.
“A desktop study was done in 2008 on opening up the Kennedy’s Vale shafts, as the Spitzkop and Kennedy’s Vale orebodies are contiguous. Spitzkop would be worked from surface towards the 1,000 m deep Kennedy’s Vale shafts and phase four would involve the equipping and development of these shafts before mining towards Spitzkop. This would cost an estimated R2 billion. “We also have the mills for expanding the concentrator to180,000 tpm, so that can be done easily.” The Kennedy’s Vale mine will have the potential to produce 120,000 ounces a year of PGMs.
“Kennedy’s Vale won’t happen for a number of years,” Robinson emphasises. “Once we have Mareesburg running and the concentrator is built, and that will be about two years out, we will then review market conditions, metal prices and revenues generated from operations,” he predicts.
“Financing options for Phase 2, 3 and 4 will be dependent upon the prevailing market conditions, future metal prices, foreign exchange rates and the revenues generated from CRM and Phase 1 operations,” Robinson explains.
A very interesting and lucrative side issue stems from the decision by Eastplats in mid-2008 to commission chrome recovery circuits within the main concentrator circuit at CRM. “We are achieving in excess of 20% recovery of chrome, which is then sold into the market, and at the moment it is generating nice revenue for us. We currently receive about R400/t, and are producing about 30,000 tpm on an ongoing basis. And the cost of setting up the circuit was only R15 million.”
“Looking ahead five years down the track I would say our established operations on the western limb would be doing about 210,000 ounces a year, and we would potentially have double that on the eastern limb,” Robinson predicts. “Furthermore, all of these projects are near surface, which means low capital cost, low operating cost, and – on the eastern limb in particular – relatively high grade. With all development phases complete, Eastern Platinum has the potential to produce well past the 600,000 ounce a year milestone,” he concludes.