Platinum producer Northam Platinum’s strategically timed R5.5-billion growth projects are said to be on track, with good planning and sound execution set to enable it to fill any potential increased demand resulting from constrained South African supply.
In August, Mining Weekly reported that Northam Platinum CEO Paul Dunne expected the current challenging market conditions and stressed balance sheets to constrain primary supply from South Africa and global demand to grow in line with world gross domestic product.
According to the World Platinum Investment Council’s (WPIC’s) third-quarter platinum report, refined production from the producer of the world’s majority of platinum, South Africa, in this quarter, was 5% lower than in the second quarter at 1.16-million ounces. This was occasioned by safety stoppages and various operational difficulties experienced by local producers.
Although global platinum mine output recovered by 27% to 6.16-million ounces in 2015, over the long term, the damage done to the mining industry is expected to lower production volumes at a time when industrial demand will be gradually firming up, states Thomson Reuters’ GFMS Platinum Group Metals Survey 2016, published in May.
“This will drive platinum back to a position of deficit and make palladium’s deficit deeper in 2016 and beyond,” GFMS precious metals mining manager William Tankard says.
The GFMS survey also highlights that platinum is moving away from its low-price past, with the team forecasting a $1 005/oz average platinum price in 2016 and Tankard expecting higher platinum-pricing trajectories.
Mining Weekly also reported in August that South Africa’s platinum mines were expected to produce barely four-million ounces of primary supply this year.
Further, Dunne notes that growth in recycled supply is set to remain muted, while estimates of surface stocks are calculated to be insufficient to deliver what will be needed this year – 8.25-million ounces, according to the WPIC.Mining Weekly also reported in August that platinum demand is forecast to reach nine-million ounces by 2025, based on a compound annual growth rate of 1.5%.
“What we’re saying is that, fundamentally, this market will be out of balance over the next ten years by some distance,” Dunne outlined in response to Mining Weekly.
To date, Northam, which has two primary operating assets, the Zondereinde and Booysendal platinum-group metal (PGMs) mines, as well as its own metallurgical operations, in the Bushveld Complex, in the northern part of South Africa, is planning on capital expenditure (capex) of about R5.5-billion on its expansion projects.
The company’s mineral reserves increased from 19.1-million ounces in 2015 to 24.5-million this year, owing to the incorporation of a Merensky and upper group two (UG2) reserve for the Booysendal South mine, and an increase in the UG2 reserve at Zondereinde.
The largest of the company’s growth projects is at Booysendal South – incorporating the infrastructure of the former Everest mine – with capex of R4.2-billion allocated to the expansion of the project. Work has started on the six-year Booysendal South project, where steady-state production is expected in 2022.
The Booysendal Merensky Phase 1 project has been allocated R300-million and is located at the Booysendal North mine. To date, R75-million has been spent on this mine, which is already contributing 25 000 4E (platinum, palladium, rhodium and gold) ounces to the Booysendal North mine’s annual output.
Essentially, the mine is a swing producer, with low fixed working costs, and will allow modular production growth to satisfy potential growth in market demand.
Another growth project is the Booysendal UG2 North deepening project, on which R60-million has been spent. This project includes infrastructure for initial mining and will be accompanied by the development of the decline system to allow for additional mining sections to be established, if needed, for swing production.
Total capex that will be invested in this project amounts to R270-million of the R5.5-billion approved for Northam’s growth projects. The mechanised Booysendal UG2 North mine is near the town of Mashishing, on the eastern limb of the Bushveld Complex. The mine came into production on July 1, 2013, reached steady-state production levels in October 2015 and recorded 161 300 4E ounces in the 2016 financial year. The fourth growth project is the Zondereinde smelter expansion project, on which R292-million has been spent, with commissioning scheduled for the second half of 2017. In total, R750-million will be invested in the smelter, which is on the Zondereinde lease area.
With processing capacity being crucial to its growth plans, Northam explains that a 20 MW furnace is being integrated into the existing Zondereinde platinum smelter to increase capacity to process up to one-million ounces a year. The company’s long-standing platinum refining partner Heraeus, of Germany, has agreed to contribute €20-million as a capital offset to the cost of the furnace in exchange for an extended refining contract and an option of buying up to 40% of Northam’s refined production.
The Zondereinde mine is an established, long-life and cash generative operation, on the northern end of the western limb of the Bushveld Complex, near the town of Thabazimbi, in Limpopo. It produces about 280 000 oz/y of PGMs in concentrate.
With Northam having entered into a three-part deal with platinum producer Anglo American Platinum (Amplats), which involves Northam paying R1-billion for a large adjoining resource in the Amandelbult mining right area, Zondereinde could potentially see its mine life extended to beyond 30 years. Through the deal, Northam will also get a stretch of surface rights and Amplats a small strategic ancillary mining resource that provides it with flexibility at the Amandelbult mine.