JOHANNESBURG (miningweekly.com) – Platinum mining midtier Royal Bafokeng Platinum (RBPlat), which has terminated major contracts at its Styldrift 1 project, on Tuesday outlined a plan that could see it hit the ground running with a surfeit of mining flexibility in an improved platinum market.

The JSE-listed black-owned company told investors and analysts on an on-site visit to Styldrift 1 that it would develop nearly 7 km of underground infrastructure during 2016, nearly 6 km of which would be on-reef and thus able to generate 70% of the R1-billion need to do the job.

The on-reef development would yield 39 000 oz of platinum at a basket price averaging R17 500/oz and the 30% funding shortfall could be provided by surplus cash from the company’s Bafokeng Rasimone Platinum Mine, also outside Rustenburg.

Development this year and next would prepare Styldrift 1 for the rapid delivery of quality ounces from four 800 m sections, four equipped workshops and 32 pre-developed workshops from the first quarter of 2017 or whenever the ounces would be appropriately rewarded.

Deteriorating market conditions and cost escalations had resulted in an increased focus on mining and processing more-profitable Merensky reef, from which 75 000 oz would arise in 2017 and 116 000 oz in 2018.

Investec Securities commented that platinum-mining companies such as RBPlat were having to take increasingly drastic action to preserve balance sheets.

Thirty-two per cent less capital was spent on Styldrift 1 in the third quarter of this year than in the second quarter.

Both the mining contract and overland conveyor belt construction contract had been terminated and most equipment supply and infrastructure contracts deferred.

By delaying the start of stoping at Styldrift I, the company was seeking to avoid the destruction of the value of quality Merensky ounces into a depressed market.

Instead, the business would position itself well to begin ramp-up when the market improved.

The current depressed market cycle was expected to prevail for the medium term and accordingly Styldrift I was now only scheduled to reach steady state in the first quarter of 2020.

Styldrift 1 is a relatively shallow, mechanised mine, that is expected to deliver 230 000 t of Merensky ore a month at steady state, yielding 320 000 oz a year by providing access to 72.9-million Merensky tonnes at a resource grade of 6.94 g/t.

The steady-state operating costs of the 60-year-life Styldrift 1 are expected to be in the first quartile of the industry cost curve by extracting Merensky reef in the first 30 years and lower-value upper group two reef in the next 30.

Local operator and maintenance skills development has begun to prepared for an employee complement of an eventual 3 000 people.

Capital expenditure at the end of the third-quarter totalled R5.186-billion on a main shaft capable of hoisting 230 000 t of ore a month.

At last count, the headline loss of 60.4c a share reflected a basket-price decline from R21 148/oz to R18 062/oz.