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Amplats shows off planet's lowest-cost platinum mine

Platinum processing plant at Mogalakwena

Platinum processing plant at Mogalakwena

2nd October 2014

By: Martin Creamer

Creamer Media Editor

  

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JOHANNESBURG (miningweekly.com) – Platinum-mining company Anglo American Platinum (Amplats) on Thursday showed off the inner workings of the most valuable piece of platinum real estate on the planet – the opencast, mechanised and highly profitable Mogalakwena platinum mine, which remained completely unscathed during the prolonged strike in Rustenburg’s strife-torn platinum belt.

As the lowest-cost producer of platinum-group metals (PGMs), Mogalakwena operated 365 days a year and 24 hours a day during South Africa's worst-ever period of labour unrest, which wracked Amplats’ more mature underground operations on the Bushveld’s western limb.

Operating free cash flow of R10-billion has been generated over 5.5 years at margins of up to 40%.

“Mogalakwena is a standout cash flow and platinum metal generating operation,” Amplats told visiting mining analysts in a slide presentation replete with information that reinforced the premium position of the operation, where nickel by-product credits alone have, in the high price cycles of the past, delivered platinum at zero cost to the mining company.

In 2007 and partially in 2008, the mine’s nickel actually paid for everything, the then Mogalakwena GM Ted Muhajir told Mining Weekly Online during a visit in April 2010.

Journalists were not included in this week's visit to the mine, where analysts reportedly heard that the value for every platinum equivalent ounce for Mogalakwena was currently 50% greater than Amplats' Rustenburg mines, which the company wants to sell or spin off into a separately listed entity.

The major value creator is the base metal loading from nickel and copper; less chrome in the concentrate is also favourable from a smelting perspective.

Amplats' business improvement hub is spearheading a platinum production outlook of  300 000 oz to 360 000 oz in 2014/15, rising potentially to 600 000 oz a year beyond 2022, depending on the extent to which the company is prepared to put its foot on the production accelerator.

Ore tons mined in 2013 were the highest ever for Mogalakwena, where safety has been enhanced by high-technology collision avoidance systems.

Stockpiles are reportedly healthy and calendar year platinum ounces produced so far this year are ahead of the 2013 trend.

For the time being, Mogalakwena is the only mining activity on the prospective northern limb of the Bushveld Complex, a veritable Aladdin’s cave of mineral treasure.

But that is poised to change as the TSX-listed Ivanhoe Mines, headed by mining entrepreneur extraordinaire Robert Friedland, is developing its Flatreef underground mine nearby, and the London-listed Lonmin has completed an underground feasibility study at Akanani.

Amplats itself is currently developing strategies to optimise its footprint to take in more of the Boikgantsho PGMs resource.

The main mineralised horizon is the 30-m- to 100-m-thick Platreef, which dips at 40º towards the west.

Some 93% of the total workforce is from near-mine communities.

Grade 12 mathematics and science plus English is the minimum entry requirement of the workforce, which is represented in the main by the National Union of Mineworkers.

Mogalakwena thrived during the 2012, 2013 and 2014 platinum mines’ labour unrest, with Amplats achieving several award-winning community engagement projects as well as the relocation of three villages involving 1 743 households.

When Mining Weekly Online visited Mogalakwena mine in 2010 – this week’s media-excluded site visit will also take in Amplats’ Polokwane platinum smelter – the mine’s significant nickel and copper credits had pushed its PGM basket price way above the group average.

At the time, four years ago, when the local currency was stronger, Mogalakwena's basket price of R25 000/oz was R6 000/oz above the average group basket price of R19 000/oz.

Mogalakwena's sub-R200/t milling cost was at that stage less than half of Amplats’ then cost-a-ton average of R450/t.

"I sometimes refer to this operation as that red Ferrari that can accelerate very quickly, but also apply its ABS brakes when necessary," Muhajir explained to Mining Weekly Online at the time.

"In 2009, we put our foot on the ABS brakes and slowed down. But we have now been given the green light to accelerate," he added.

At the time, the recently opened new pit was only 100 m deep with a planned depth of 500 m, and its length was 1 500 m with a planned length 7 000 m.

Its width was then 350 m and its planned width 1 200 m, across a strike length of 21 km.

The large openpit operation, which even then was the largest platinum openpit in the world, is on its way to becoming the world’s biggest platinum superpit, using some of the world's biggest equipment.

Officially, Amplats has referred to a 39-year openpit mine life, but with 11-million tons being put through the mill a year during the visit of Mining Weekly Online, from an ore resource of 1.1-billion tons, one arrives at a couple of centuries of life for this lucrative operation, the resource figures for which include future underground potential already under scrutiny.

As the market recovers, Mogalakwena is the accelerator that Amplats is using because of its extremely low costs and comparatively high flexibility.

But a downside during the visit of Mining Weekly Online was community relocation. Mogalakwena had, at the time, been involved in a rumbustious multi-year community relocation programme and while it had succeeded in relocating 99% of the people from one nearby village and 88% of the people from a second village, pockets of resistance remained from diehards holding out for a better deal.

The closest "officially" occupied house during the visit of Mining Weekly Online was 585 m away from the pit and Mogalakwena was having to continually monitor shockwaves and dust and video every blast.

A hold-out group at that stage requested to renegotiate the relocation deal, some of them asking for shares in the mine and others R1-million per family as compensation.

Others, not there when the relocation agreements were struck, arrived on the scene unexpectedly and were encroaching on the mining area in an "unofficial" post-relocation advance.

The Amplats executive assigned to interface with the government and the communities on the relocation problem at the time was Ben Magara, who is now CEO of Lonmin; at the time, there was talk of the community being incorporated into a possible future tailings retreatment business.

When Mining Weekly Online visited the mine more than four years ago, Amplats had already built 1 000 impressive dwellings for those agreeing to be relocated and journalists were shown an incipient agricultural hub that was earmarked for 100% community ownership once it became commercial.

Edited by Creamer Media Reporter

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