ZIMBABWE remains the key area for Impala Platinum’s production growth and the R1 billion ($35,3 billion at interbank rate) investment in a large South African project owned by African Platinum is to balance the company’s portfolio and address share
holder concerns, chief executive officer David Brown said this week.
Brown said while Zimbabwe was regarded as the largest organic growth potential within the group, there was need to balance growth in Zimbabwe and South Africa.
“We still regard Zimbabwe as our largest organic growth potential within the group, but clearly we want to balance growth in South Africa and Zimbabwe,” Brown said.
Impala, the world’s second-largest platinum producer, would conclude an agreement early next year to buy a 29,9% stake in African Platinum’s South African project on the southern portion of the Western Limb of the Bushveld Igneous Complex.
The R1 billion ($35,3 billion) will be funded internally. “It’s a balancing of our portfolio rather than a statement regarding our growth potential in Zimbabwe. We are still very committed to our growth in Zimbabwe and we see those ounces coming to the market in the fullness of time,” Brown said.
“We have a very significant resource base in Zimbabwe, but we were always mindful that we wanted to demonstrate to shareholders that we had growth opportunities within South Africa and Zimbabwe,” he said.
“With this particular project, we will have gone some way to providing comfort to shareholders in that regard.” Impala has projects to grow production to 2,3m oz by 2010, and wants to find more ounces beyond that.
The Afplats investment is the first step in the next phase to get to 2,8m oz. “The demand fundamentals for platinum group metals look very solid in the medium term and we would love to be able to expand into that growing demand. Participation in this project will allow us to grow our owned ounces,” Brown said.
There is the potential for Impala to take over the project, but such a decision would depend on a number of factors. Afplats founder Roy Pitchford was behind the start up of Zimplats, which was taken over by Impala.
“It’s very much horses for courses and it (a decision to takeover the Afplats’ project) would be very dependent on the value proposition at the appropriate time,” Brown said. Impala has an 86,9% stake in Zimplats, the operating company in Zimbabwe, which has slowly been mired in an increasingly difficult political situation under the 26-year-long presidency of Robert Mugabe and an economy spiralling out of control.
The freshly released annual inflation rate figure of 1,098.8% is the highest in the world and shows no signs of abating. The Zimbabwean government has said it wants to take 51% of mining assets operated by foreign companies, a process it has called indigenisation.
An agreement between Impala and the Zimbabwean government in May allowed for the return of 36% of Zimplats’ 140,8 million ounces mineral resources to the government for which Zimplats was to receive an empowerment and cash credit of $153m, calculated to be equivalent to 30% empowerment.
The 140,8m oz made up about half of Impala’s total resources.
There are plans for Zimplats to grow output to 145 000 oz/year from its current 85 000 oz/year, and there is potential to increase production to 450 000 oz/year in 100 000 oz increments. AIM-trade Afplats is on the cusp of starting to develop its 300 000 oz/year Leeuwkop project, half of which will be paid for from the funds raised in the sale of a 29,9% stake in its South African assets housed in a company with the interim name of Newco.
The R1 billion ($35,3 billion) would fund the building of a mine. Another R1,3 billion is needed to bring in a concentrator and complete development of the project.
Afplats has a 10-year offtake agreement with Impala Refining Services to purchase concentrate from the first phase Leeuwkop project, which exploits nearly seven million ounces of UG2 reserves. Leeuwkop is scheduled to reach full production in 2010.
The Afplats properties, which include Leeuwkop, Imbasa and Inkosi, have a platinum group metal resource of 92m oz, and there is the potential for another two twin-shaft systems that will raise output to a million ounces a year.
“The growth of any mine has a natural rhythm to it and one must be cautious of pushing too hard too soon,” Brown said, adding there are constraints on skills availability when it comes to building new projects.
“The initial focus is on the Leeuwkop project and get that bedded down. Quite clearly, to the extent that the other growth profile makes economic sense, of course we’d like to accelerate it as fast as we can,” he said. — Miningmx.com