JOHANNESBURG (miningweekly.com) – Mining industry doyen Brian Gilbertson, who has been involved in several landmark industry-making investments, foresees South Africa’s platinum endowment as providing the potential for yet another industry-making surge.
Besides the outlook of growing demand and struggling supply, there is a snowballing conviction that South Africa could and should become the first mover in creating a kind of ‘Platinum Valley’ that emulates the great Silicon Valley success of the US – and Gilbertson’s Newco is willing to stride towards that potential goal, with the full backing of the State-owned Industrial Development Corporation (IDC), exciting new technology that is poised to assist in adding value and a local community leader who is champing at the bit to see that it happens in his area.
“Being a miner and a beneficiater will allow shareholders to participate in the entire value chain,” Newco’s Arne Frandsen tells Mining Weekly Online in a video interview (see attached).
The IDC, which currently has R100-billion-plus on its balance sheet, is part of a special task force that, together with the R23-billion Newco, is driving the beneficiation initiative.
The combination of the IDC, the JSE-listed Pallinghurst, the Algemene Pensioenen Groep of the Netherlands and the Temasek sovereign fund of Singapore, have repackaged the former Platmin and other platinum assets into the debt-free Newco, which has $500-million cash at-the-ready.
The intention is to take Newco forward as an industry changer with shareholders potentially benefiting from the full platinum supply chain in a Southern African region that has a virtual monopoly on platinum-group metals (PGMs), which are being used in an ever-increasing number of industrial-consumer applications.
Using a temporary name for the large restructured company that will be relisted in a year as an integrated PGMs miner and beneficiater, Newco expects to be producing at a rate of 1.1-million ounces a year in five years’ time, 750 000 oz/y of the platinum, palladium, rhodium and gold (4PGEs) being produced on the western limb of the Bushveld Complex and another 400 000 oz/y on the eastern limb.
Meanwhile, a new low-energy technology, the Kell Process, appears to have the wherewithal to debottleneck platinum value-add with the help of IDC funding.
“It’s a very powerful proposition for any shareholder,” says Frandsen, who is studying the feasibility of listing Newco on three exchanges – the JSE, Hong Kong and the LSE – within a year.
“The natural home would be our home exchange, the JSE, and it will then in all likelihood be either Hong Kong or the LSE. We have already had extensive discussions with Hong Kong and that is a distinct possibility.
“Closer to the time, we’ll take the decision whether it's going to be Hong Kong or London or Hong Kong and London,” Frandsen tells Mining Weekly Online.
IDC CEO Geoffrey Qhena sees Newco as a special investment case and another one of Gilbertson’s potential industry changers.
He believes that Newco will enable beneficiation to happen, in line with government priorities.
“This is but one of the many steps that we will be taking,” adds Qhena, referring to the company paying R3.24-billion for 16% of Newco.
Department of Trade and Industry (DTI) director-general Lionel October told Mining Weekly Online in January that a DTI team was working with participants to determine the economic viability of establishing a central platinum hub with satellites that allow for locational flexibility.
“Some of the provinces and our local companies have been working on moving into the commercialisation of fuel-cell technology, so, definitely, this could be one area that we designate as a special economic zone (SEZ),” October was quoted as saying in the interview earlier this year.
The South African government, which is hoping its new SEZs Bill and policy will create the framework for the development of new industrial nodes outside the traditional industrial heartlands, has identified platinum as one of South Africa’s strategic minerals in view of the overwhelming bulk of the world’s deposits being in South Africa and neighbouring Zimbabwe.
“There have been major developments in terms of diversifying the sources of demand for platinum, especially in the general area of clean energy and fuel cells,” October noted.
Insiders report that Kgosi Nyalala Pilane of the Bakgatla-Ba-Kgafela community, which owns 27% of Newco, is keen to offer the community’s area, near Newco’s Pilanesberg operation, as platinum’s potential Silicon Valley.
“Mining will be vital to achieving our goals as we have identified mining as a catalyst of change. The final important pillar of our strategy is the industrial hub, which we are already building,” says Pilane, who has been an integral part of Newco’s consolidation of three platinum properties near Moruleng.
If the Kell process works out, as initial tests have shown, energy-intensive smelting will be replaced by a simple roasting process, which will give beneficiation a greater chance, as the process makes do with only a fifth of the electricity required for smelting.
But Gilbertson is refusing to count his chickens before they have hatched: “Long experience says to me that we need to get through more tests and we will be very happy to fund those tests, and through this joint venture with the IDC we’ve agreed to explore that kind of opportunity. The first one will be this Kell process because we’ve actually used it on our concentrates already.”
Kell’s products will either be in powder form or could be designed so that they are in liquid form for use in the manufacture of items like autocatalysts and clean-energy fuel cells.
“I have to say that’s a little ahead of where we are, but once you have that process running, you look for the additional opportunities and, as you know, the government and its industrial arm, the IDC, are very interested in seeing beneficiation develop,” Gilbertson comments.
Autocatalyst manufacture already takes place in South Africa, but the platinum goes out of the country for conversion into liquid and is then brought back and taken to Port Elizabeth for use in the manufacture of autocatalysts.
“All of that you could sidestep. I don’t want to go too far on this because we haven’t done that kind of study or project viability analysis but, yes, once you are there and you are starting to do this, other opportunities, I think, will come,” Gilbertson comments to Mining Weekly Online.
Gilbertson is fundamentally exceedingly bullish on PGM demand: “If you take any kind of reasonable outlook, I am very, very bullish on PGMs,” he says on camera (see video attached).
"I call it fairy dust," says Frandsen.
Against a positive demand-side outlook, there is a negative supply-side outlook, which always pleases miners.
On overall platinum supply by the industry as a whole, Gilbertson requotes what Winston Churchill told his war Cabinet: “I can offer you nothing but blood, sweat and tears.”
The poor supply outlook is the result of the challenges of mining at depth and the safety issues that go with it, the cost of development and the cost of production.
Newco, by contrast, is likely to be surface mining for some ten years before it will have to consider going underground, and, even when it decides to, it will not be at great depth, giving it the ongoing competitive advantage of safer, lower-cost ounces.
Giving their tacit support at the Newco media conference were Stanley Khoo of Temasek, the Singaporean sovereign fund, and the deputy head of the Netherlands Embassy in Pretoria, Wouter Jurgens, representing the Algemene Pensioen Groep of the Netherlands.
The country-changing Mozal aluminium smelter project that Gilbertson led earlier in his career, and the jobs it created, would not have been possible without the participation of the IDC, which is again needed to enable Newco to reach its full potential.
“This is doing mining in a different way,” says Frandsen.
Newco has its origins in the TSX- and JSE-listed Platmin, one of the companies that form part of the Newco consolidation.
However, Toronto proved that it is not a natural home for a platinum producer.
Although there is no urgency for cash-rich Newco to raise equity capital, it may well decide to do so in order to create further free float and to fund beneficiation aspirations.
“We will be listing as a mine-to-market company,” Frandsen adds.
PGMs have dual uses as a precious metal that is a store of value in jewellery and in continually growing industrial uses.
“Most people don’t fully appreciate the importance of PGMs in industrial applications in the world around us and in economic growth.
“If you pressed them, then the average person would know that underneath each motor car in most counties is an autocatalyst without which you cannot take the car on to the road and that autocatalysts convert the noxious fumes from the engines into harmless emissions into the atmosphere.
“What people don’t know is that even if you could take the catalyst off, and nobody wants to, you would not be able to run that car anyway because there would be no fuel in the tank, because there’s no economic way to refine crude into the petroleum products on which motor cars run, without the platinum catalysts providing a cost-effective solution,” Gilbertson reminds.
It is also not possible to make nitric acid without platinum catalysts, “and if you can’t make nitric acid, there is a whole range of explosives used in industry which you can’t make. And you can’t make nitrogenous fertilisers, which is terribly important in agricultural production”, he adds.
PGMs are essential wherever a catalyst is needed in very high temperature resistance and strength situations.
The estimate is that 20% of all consumer goods – the telephone, television, DVD player and many other items – either contain a very small quantity of a PGM or they have been touched by PGMs somewhere in the manufacturing process.