Looking at Eastern Platinum’s (Eastplats) share price movement in Toronto this year, investors may be forgiven for thinking the company is in someone else’s sights.

Eastplats reached a new year high on the TSX last week at C$1,69 a share.

Although it is still far from the C$4- a-share level reached just over two years ago, it has almost tripled in the past six months. The company’s share performance has also beaten the price rise of platinum, which has climbed 21%, from $1 350 in October last year, to $1 713 last week.

Vancouver-based Eastplats CEO Ian Rozier declines to say whether the company has received any approaches.

He does, however, tell Mining Weekly that the platinum world is a small one and “everyone talks to each other from time to time”.

“We have low-cost operations and no debt. Eastplats represents a very attractive acquisition target going forward.

“It’s highly probably people have approached us, but I can’t comment,” he says.

Of course, the theme is not a new one. Since Xstrata CEO Mick Davis first entered the platinum business through a joint venture with Anglo Platinum and its acquisition of Eland Platinum, there has been perennial speculation it would go after Eastplats.

Such a move would make sense, as Eastplats’ producing Crocodile River mine and Xstrata’s Elandsfontein mine fit together like a jigsaw puzzle. Eastplats’ Spitzkop project, in Mpumalanga, also borders one of Xstrata’s properties.

Now that Xstrata is generating good cash once again with the recovery in metal prices, it may make a move on Eastplats before trying to buy out Lonmin once again.

Xstrata spokesperson Songezo Zibi declined to comment on “speculation”.

Growing Production

Rozier is not distracted by any potential action on the corporate front, however. He and his team are hard at work finalising capital costs and peak funding requirements for Eastplats’ growth projects.

These include eastern limb ventures Kennedy’s Vale, Spitzkop and Mareesburg, as well as the potential to more than triple production at the Crocodile River complex from 400 000 oz to 500 000/y.

Says Rozier: “We’re very close to com- ing up with the capital requirements. We hope to have these numbers in the next few weeks.”

These projects have the potential to transform the company into a 400 000-oz/y-plus producer in the next three years, from its current 130 000-oz/y production. Develop- ment at Spitzkop and Kennedy’s Vale has been on hold since December 2008.

Spitzkop is the most advanced project and the company has already ordered mills and started developing two decline shafts.

To boost production at Crocodile River beyond the 200 000-oz/y mark, Eastplats would need another concentrator.

There would be sense in going ahead with this, as the company owns a smelter at the mine, which requires refurbishment. The company has to send Crocodile River’s concentrate to Impala Platinum for toll- smelting – up to a level of 200 000 oz/y.

If the company could produce 250 000 oz to 300 000 oz/y over and above this, it would almost exactly match its own smelter’s capacity. But to get the smelter up and running would require an investment of around C$100-million.

Price Forecast

Any such investment would need to be made in an environment of high metal prices, and Rozier is bullish on the platinum market.

He says the new platinum-group metals investment products introduced in the US last year have been good for prices.

The two major traditional buyers – the US and European car markets – have not yet recovered to any major degree from the economic collapse, and yet platinum prices have continued their climb. Why?

China last year replaced the US as the world’s largest car market, having sold 10-million passenger vehicles – a 53% increase on 2008’s number.

And Demand Is Still Growing

“The price of platinum has gone up and the industry still cannot react to the dramatic increase in demand,” Rozier said.

Supply will further be constrained by South Africa’s power problems, which are not going to go away anytime soon. When the power crisis struck in January 2008, the platinum price shot up to over $2 300/oz.

The country accounts for 75% of global production, so any significant supply interruptions there have a magnified impact on the price.

“When Eskom has its next problem – and it will – there is going to be a price spike while the global economy is moving into recovery phase,” says Rozier. The only reason the platinum price dropped from its 2008 highs was the impending recession.

He believes, if there was a supply hiccup now, prices would shoot up and stay up.

“If we have an Eskom problem coming into recovery, we could easily see platinum going over $2 000/oz and being sustained at that level.

“This time round, we’re going to see a different set of dynamics. I think we’re in a great space at the moment,” Rozier concludes.

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