Typically the progression from project to producer has a low rate of success. Toronto Stock Exchange (TSX) statistics from a few years back show the project to producer pyramid sees about 3% of projects undertaken by juniors ending up as producers. However, Ken Lomberg, Southern Africa Regional Manager of mining consulting group Coffey Mining, says platinum projects on the Bushveld Complex are different.
“The Bushveld Complex is an anomaly housing the vast majority of the global PGE resources in a number of well known planar ore bodies. If only five or six Bushveld projects come to fruition, this will mean some 20% of projects have been successful; considerably better than the global average.” Investec research indicates that if the entire suite of junior to mid-tier platinum projects planned and underway in South Africa in 2006 reach fruition they would by 2014 add three million platinum ounces to the platinum supply, if one excludes these as replacement ounces. It would bolster the approximately five million ounces (out of a 6.5 million ounces total global production) that Johnson Matthey research had as South Africa’s platinum output in 2007.
“My view is that there is little danger of the market failing to absorb any new platinum output. Thus if a junior to mid-tier project is viable in the platinum sector it is likely to become a producer,” Lomberg says.
For that reason Lomberg believes it would make sense for any junior seeking to develop a project in Africa to choose the Bushveld Complex above other destinations. “A lot of people internationally have not yet understood just how unique the Bushveld Complex is.”
One of the main reasons for the surge in junior activity in South Africa is the change in the minerals rights legislation in the form of the South Africa’s Mineral and Petroleum Resources Development Act (MPRDA), coupled with the rising platinum price, “but can you imagine what it would have been like if the Bushveld Complex was in Canada?” Any one of the platinum projects seen as high risk, marginal and unexciting in South Africa would make headlines if it were in Canada.
There is some leeway even should the PGE basket price fall by 25%. Most of the projects will still be viable, as they are typically factoring long term prices of US$1,200 to US$1,500 per ounce of platinum.
That said, not all the projects will come about as would-be project developers head into more difficult or unknown geological settings. The best ore bodies have probably already been exploited and those now being looked at feature lower grades and are often deeper. Another risk, one Lomberg is intimately aware of, is how developers of projects are looking to accelerate their feasibility groundwork. “Feasibility studies typically progress from scoping to pre-feasibility and finally onto a full feasibility. The chain seen elsewhere is typically not followed with consultants put under pressure to deliver feasibility without going through all the opinions but providing the detail the developers want and expect. As developers bid to move the project up the value chain as rapidly as possible, they are trying to undertake all aspects of the feasibility in parallel.”
“However, funding opportunities exist and anyone who is determined enough can generally obtain capital for a junior platinum project,” Lomberg says. “In addition, whereas in the past the platinum producers kept their proprietary PGM processing knowledge inhouse, that is no longer the case and technical knowledge is available.”
Juniors will Change the Paradigm
Lomberg believes it is the not the majors but the juniors that will change the paradigm of the platinum sector as they push the envelope of what has been conventionally accepted. “The major mining companies, Anglo Platinum, Impala and Lonmin, have their hands full at the moment and may be electing to wait on the sidelines,” Lomberg says.
“The juniors are able to consider options the majors are, due to their corporate nature, reluctant to explore. The juniors can be on the edge of technical and financial developments in the industry. At the same time, taking into account that in absolute terms the amount of capital the juniors represent is tiny in the context of the mining industry, the potential benefits are extremely high.” To put this in context, the TSX, well known as hosting the greatest number of small mining and exploration ventures with its thousands of junior mining companies, is in terms of overall mining sector capitalisation similar in size to the JSE in South Africa.
“It will be interesting to see how the strategies of the majors evolve. The electricity crisis in South Africa limits the opportunities for any would-be independent smelter, so the majors are well placed here. At the moment majors have stakes or joint venture arrangements in many junior projects. It may be where they have held the old order mineral rights, and this holding possibly means keeping their options open for as long as possible. It should not necessarily be seen as an endorsement of a project.”
A significant trend is that deposits that were not considered in the past are now being considered, and the direction is inevitably towards projects that can mine lower grades economically. In particular, some juniors will be looking at open pitable potential and horizons other than the Merensky Reef and UG2 Chromitite Layer. In other words, the Platreef-type deposits will come into play and may see more projects. Lomberg also suggests that the cutting edge of the business is in the process capability and that should someone sponsor a bright PhD student to do research in this direction a breakthrough will in all likelihood be rewarded.
“The goal of the juniors in theory is to reach mid-tier producer status,” Lomberg says, and companies like Aquarius, Xstrata (through Eland Platinum), Northam and ARM, with its interest in the Two Rivers project, have achieved this status. Eastplats may be able to make that transition should its Spitzkop and Kennedy’s Vale projects go ahead. Anooraq, which has achieved buy-in from Anglo Platinum, could also be on its way to mid-tier status with its Lebowa, Ga Phasha, Boikgantsho projects. The juniors, of which at least 20 exist, have different origins and approaches. One of the most advanced is Platmin which has purchased licences where the platinum bearing reefs outcrop at, or near, surface and is active with the Pilanesberg, M’Phatlele, Grootboom and Loskop projects.
The junior platinum sector also sees among its number the world’s largest gold producer, Barrick, a company that would be deeply insulted at being categorised here; however, it is looking at a project, Sebidelo, near Anglo Platinum’s Union Section, which typically does not characterise a platinum major. This alone demonstrates the anomaly that is the Bushveld Complex.
“Joint ventures are being considered where it makes sense for the owners of adjacent properties to do so.”
Among the juniors is Ridge Mining which is building its Blue Ridge mine. The London based, and now JSE listed, Jubilee Platinum illustrates Lomberg’s point with its Tjate project, as it was a company initially focused on exploration in Madagascar before realising the great potential in the Bushveld Complex. At the same time, to illustrate that the exception proves the rule, there is Ivanplats which came to the Bushveld Complex but then refocused its activities in Mongolia and other parts of Asia.
The technology focused Sylvania Resources on the other hand, has apparently developed a process for chrome tailings material that profitably recoveries PGMs. It has done its project engineering in-house. Wesizwe Platinum is looking to develop a project on the Western Limb next to the Rasimone mine which is deep and has been shown to be heavily fractured. Lesego Platinum is looking at the Phosiri project, a deep ore body at the northern end of the Eastern Limb and may be an example of geological reinterpretation as it looks to up-throws in what would otherwise be a very deep level project. Nkwe, which seems to be well down the road with the development of the Genoah project has thanks to key individuals been able to drive its project to such a point. Platinum Group Metals (PTM) has the War Springs property, which will be a challenge as it is bisected by a north south railway line as well as national roads. Caledonia mining is working on the Rooipoort property on the southern edge of the Northern Limb close to the Grass Valley (Pan Palladium) and War Springs properties. Then there are some groups like Bushveld Platinum and Platinum Mining Ventures, which are less well known.
Although the junior platinum exploration and mining sector has yet to met all the objectives of government it has created a more creative dynamic approach outside the major mining companies. It has brought new ideas, funding and skills into South Africa’s platinum sector and has boosted South Africa’s platinum production prospects. Overall the junior mining sector is a huge positive for the mining industry. The feedback loop it is part of has created more space for the project houses and for consultants.