Miners Anglo Platinum and Xstrata Alloys have formed a joint venture to develop a platinum-group metals (PGM) mine and concentrator plant on the Eastern Limb of the Bushveld Complex, in the Mpumalanga Province.

The project is expected to involve capital expenditure of some R1,35-billion, or $200-million, up to commissioning, to which Xstrata and Anglo Platinum will each contribute equally.

The companies believe that the project benefits from a life-of-mine of about 20 years at a planned milling rate of 200 000 t a month and an estimated head grade of 3,74 g/t.

Xstrata will be responsible for developing and operating the underground mine, contributing its expertise in mechanised room-and-pillar mining, while Anglo Platinum will construct and manage a 200 000 t a month PGM concentrator.

Anglo Platinum will buy Xstrata's 50% share of PGM concentrate for further smelting, refining and marketing of finished product.

Xstrata will construct a beneficiation plant at its own cost to process the UG2 chrome tailings arising from the PGM concentrator and will purchase Anglo Platinum's share of chrome concentrate.

The announcement comes on the back of Anglo Platinum CEO Ralph Havenstein's comments at the company's interim results presentation a short while ago, saying that the company would soon be making an announcement as to greenfields projects that would be going ahead.

At the time he indicated that Twickenham was the most likely contender but an analyst has pointed out that this would not be such a straightforward venture, as the conventional mining would require further investment. The mix, he said, is not as favourable as it is further south where the new venture is.

Trevor Raymond, speaking on behalf of Anglo Platinum, said that the mine would generate better returns and be up to speed quicker due to its mechanised nature, an area Xstrata is competent in.

The Mototolo joint venture is tipped to produce about 132 000 oz of platinum and 82 000 oz of palladium in concentrate each year.

A platinum industry analyst, speaking on conditions of anonymity, told Mining Weekly Online that, while no surprise, the project does make sense as the it will be cheap to start up and will be on-stream quickly.

Returns should be better than would be found with other operations that would require a longer start-up period.

The Department of Minerals and Energy too will be pleased at the use of resources in an underused area and over 1 000 jobs will be created.

From Xstrata's perspective, the analyst says that they already had property and to start up with a platinum force such as Anglo Platinum behind them would be simpler. In addition the company will only be mining the metal, not selling it, and is unlikely to become a major platinum miner this way.

Xstrata spokesperson Etienne du Preez explains, “the project certainly offers Xstrata an initial entry into a commodity that benefits from strong market fundamentals and one that is attractive to us, as we have signalled previously”.

But the analyst points out that, if it is a stepping-stone into platinum, where the company has previously expressed interest, it is only a small one, rather it would make more sense for the company to take over a platinum producer.

Du Preez, however, declined to comment on whether this signals the start of a new era for the company: “At this stage we cannot comment on whether this project will lead to Xstrata developing further PGM projects.”

But CEO Peet Nienaber indicated in a statement that the venture “provides Xstrata with an entry into an attractive commodity, working with an experienced partner.

“The combination of Xstrata's expertise in developing and managing underground chrome mines, together with Anglo Platinum's processing and downstream capabilities, will enable both partners to realise a low-cost high-return project with a rapid development profile.” The venture, a pooling and sharing arrangement, which sees each partner pool its assets and take an equal share in the profits, is a shift in strategy for Anglo Platinum from five years ago.

The mine has recently forged a few relationships of this kind, such as Marikana, while another example is the KPM deal.

A similar example exists with Aquarius Platinum as a contract miner. However, this mine differs as Aquarius is mining and concentrating the ore whereas this mine requires that Xstrata sink a new decline shaft and Anglo Platinum build a concentrator, which is where its expertise lies, on the Helena farm. Industry commentators have indicated that the Anglo Platinum does not produce value when mechanised mining is used instead of conventional methods, and it makes sense for the miner to take Xstrata as a partner.

Construction of the mine and concentrator is expected to start in the third quarter of 2005, with initial production of PGM ounces anticipated in the last quarter of 2006 and full production in the third quarter of 2007.

Raymond adds that the concentrator will be constructed for the purposes of dealing with the UG2 ore mined at Mototolo and will be distinct from any other possible future operation.

Each mining firm will contribute a similar amount of in-situ PGM reserves and resources from Xstrata's Thorncliffe farm, adjacent to its Thorncliffe chrome-mine and Anglo Platinum's bordering farm Richmond, part of its Der Brochen project area, to the venture.

Both parties said they would work to comply with the requirements of South Africa's Mineral and Petroleum Resources Development Act and Charter, which stipulates that 26% of mine equity or equivalent output should be in the hands of previously excluded individuals by 2014.

Each miner has to ensure that they comply with the Act, which has five-and-ten year plans although, at the moment, it would be premature to discuss how they plan doing so.

The rights under which the area will be mined are old-order rights and each party will have to satisfy the Charter requirements. Booysendaal, for example, is a 50:50 venture with an empowerment partner.

Havenstein added: “By leveraging off the strengths and experience of both partners, this project will accelerate Eastern Bushveld platinum development and will also create some 1 100 new job opportunities.

“The formation of the Mototolo joint venture will increase Anglo Platinum's production of platinum-group metals in a capital and cost-efficient manner.”