Nico Muller
Photo by: Creamer Media
JOHANNESBURG (miningweekly.com) – Platinum group metals (PGMs) mining company Impala Platinum (Implats) on Monday entered into a definitive agreement to acquire 100% of the outstanding shares in North American Palladium Limited for close to R11.4-billion.
North American Palladium (NAP), a company headquartered in Toronto, Canada, primarily mines and explores for palladium.
Listed on the TSX and the US OTC market, NAP wholly owns and operates the Lac des Iles Mine, northwest of Thunder Bay, Ontario, and also has an ownership in two Canadian exploration properties, the Sunday Lake Project and Shebandowan Joint Venture.
In operation since 1993, Lac des Iles is a PGMs producer, which in 2018 produced 237 461 oz of palladium at an all-in sustaining cost (AISC) of $690/oz. The operation is on track to meet its 2019 production guidance of 220 000 oz to 235 000 oz of palladium at an AISC of $785/oz to $815/oz produced.
Implats CEO Nico Muller said the transaction would expedite Implats’ transition to becoming a multinational producer, allowing the company to capitalise on expected medium-term deficits in the palladium market.
He added that the deal provided access to an established 700-employee, round-the-clock operational asset, which employs bulk-mining mechanised methods and occupies an attractive position on the industry cost curve. At any one time, there are not more than 200 people underground.
“History has shown us that it is important to develop in-country leadership. We don’t have a very attractive success record of exporting South Africans to head up operations. I say this particularly with regard to NAP, where we do have very strong leadership. What is important is that we develop strong alignments and integration between the South African head office, operations and Canada,” Muller said in response to Mining Weekly Online.
“The company has been very impressed with the leadership and operational teams… and we’d like to keep it pretty much the same and retain key management. What we will do is manage the transition very carefully and look at governance practices being embedded into NAP, so we will send a small transition team to manage that process,” said Implats group executive: people Lee-Ann Samuel.
NAP is led by President and CEO Jim Gallagher.
Payback period at current spot prices is expected to be less than three years, Implats group executive: corporate development Kirthanya Pillay stated in the teleconference covered by Creamer Media's Mining Weekly Online.
The operation comprises an underground mine, surface mining activities, and a 13 500 t/d (400 000 t/m) capacity concentrator plant, and benefits from year-round road access and low-cost electricity from the provincial power grid.
The nine-year-life Lac des Iles has measured and indicated mineral resources inclusive of mineral reserves of five-million ounces of palladium at a grade of 2.14 g/t, and proven and probable reserves of three-million ounces of palladium at a grade of 2.31 g/t. Platinum and gold together with nickel and copper are the primary co-products at Lac des Iles.
Implats and NAP have an existing relationship dating back to 2017 through the prospective Sunday Lake Project, located 60 km south of Lac des Iles. In 2019, NAP exercised its earn-in option to acquire a 51% interest in the project from Implats, reducing Implats’ ownership to 24%.
This is the first mine acquisition outside of Africa for Implats, which has been exploring in North America since 2012.
Lac des Iles began as an opencast mine, which progressed underground when the opencast operation was mined out.
The mill processes mainly underground material but also lower-grade surface material from stockpiles.
Four areas with opencast potential remain but the underground portion has better grades.
Implats CFO Meroonisha Kerber said initial funding of the R11.4-billion would be by way of R6-billion cash and the rest of the funding would be through a bridge facility with Morgan Stanley for about R5.3-billion. The intention would be to refinance the bridge in the short term and when doing so, the company would look at a combination of debt, the placing of some of the treasury shares the company holds and the rest by cash resources.
“When we look to refund the bridge, we'll consider all the different financing options that are available, find out what is most cost effective for the group and what is most value accretive,” Kerber said.
Implats executive: corporate affairs Emma Townshend described the transaction as a reflection of the depth of understanding and knowledge of South Africa as a dominant PGM producer.
“Because of South Africa’s dominant role in terms of PGM production, I think it’s an industry where we are arguably world leaders and we see opportunities where possibly other people wouldn’t. So, I think it’s actually an advertisement for South Africa and its expertise,” said Townshend.