Diversified mining giant Xstrata has signed a binding heads of agreement with minerals resources company Genorah Resources, and its platinum mining subsidiary, Nkwe Platinum, granting Xstrata the option to acquire a maximum of 50% interest in five platinum-group metal (PGM) properties on the eastern limb of the Bushveld Complex.

Nkwe nonexecutive director Mxolile Nkuhlu said during a media briefing in Johannesburg, on Wednesday, that the group found it necessary to engage with a strategic partner with the financial capacity and technical expertise to further enhance its projects.

Xstrata Alloys CFO Mark Moffett added that this represented an exciting opportunity given the miner's stated objective of becoming a significant player in the PGMs market.

Moffett commented that this agreement would be complementary to the bid Xstrata had made for Lonmin earlier on Wednesday. He explained that the proposed acquisition of Lonmin would allow it access to producing operations in the short term, while its partnership with Nkwe and Genorah was an "exciting growth opportunity".

Meanwhile, Nkwe and Genorah were in the process of finalising a bankable feasibility study, which it expected to be completed by the fourth quarter of 2009 at the latest, after which, Xstrata would have the opportunity to exercise its right for 50% participation in the project.

In return, Xstrata would fund the total development cost of the projects from production to concentrating, explained Nkuhlu. He added that the companies would still discuss and further refine the details of the agreement.

Further, the companies had also undertaken to conduct a feasibility study to investigate establishing a smelter and refinery on the eastern limb of the Bushveld Complex.

Nkwe business development and investor relations executive GM Shammy Luvhengu commented that the companies wanted to create an "integrated entity across the value chain from production to market".

Nkwe and Genorah have already defined a resource base of 20-million PGM ounces, with a targeted mineralisation base of 100-million PGM ounces.

Developing the mine was expected to cost between $1,6-billion and $2-billion, although these were still tentative numbers, explained Luvhengu. He added that the smelter and refinery could cost between $200-million and $400-million, estimated on a replacement cost perspective.

The companies expected first production from the southern properties to start in the fourth quarter of 2010.

The five properties comprised the farms Hoepekrantz, Nooitverwacht, Eerste Geluk, Garatouw and De Kom, and were adjacent to Anglo Platinum's Modikwa operation and Impala Platinum's Marula operations.