Lonmin CE Ben Magara says the company is in "advanced" talks with Sibanye-Stillwater about extending K3 mine into its suitor's neighbouring Siphumelele mine. Picture: RUSSELL ROBERTS
Lonmin CE Ben Magara says the company is in "advanced" talks with Sibanye-Stillwater about extending K3 mine into its suitor's neighbouring Siphumelele mine. Picture: RUSSELL ROBERTS

World number three platinum miner Lonmin is in advanced talks with Sibanye-Stillwater about mining into its suitor’s ground to keep its flagship shaft operating at optimal levels.

In SA, the underground ore bodies are divided by what are commonly called “farm-fence boundaries”, which are artificial constructs that delineate a company’s mining area and can create problems when operations reach this line.

There have been a number of instances where companies swap underground resources, mine neighbouring resources under royalty agreements or buy them outright.

Lonmin, which is cash-strapped and cannot afford to build the extensions and complete the projects the company so desperately needs, is engaged in talks about mining laterally from its K3 shaft into Sibanye’s Siphumelele mining area, Lonmin CEO Ben Magara said in an interview last week.

“We are in advanced discussions with Sibanye and the department of mineral resources. We are spending some risk capital to get that project going. We are not there yet, but our haulages in preparation to mine that area,” he said, adding the intention was to mine 40,000 tons a month from Siphumelele, keeping K3’s output at 280,000 tons a month and unit costs as low as possible.

“We could go on with this mining for five to ten years. Siphumelele would only get to it in 30 years. If we mine it now the net present value is clear,” he said. “The K3 project is a stand-alone commercial project.”

K3 is the biggest source of platinum group metals for Lonmin, accounting for about a quarter of production. Lonmin recorded sales for the 2018 financial year to end-September of 681,000oz but forecast sales to fall to between 640,000oz and 680,000oz during the 2019 financial year as it closed high-cost shafts.

Asked if the deal with Sibanye could be concluded before the end-February 2019 stop date for the merged company, Magara said: “Yes.”

With the all-share takeover bid by Sibanye for the whole of Lonmin expected to be concluded before the end of February 2019, Magara said he hoped for the transaction to be concluded soon.

Magara declined to give much more detail, but it is a transaction that would clearly be in Sibanye’s interests and align with its plans to consolidate platinum mines in the broad arc of the world’s single largest platinum group metals deposit stretching from Rustenburg down to Brits.

The Competition Tribunal imposed a six-month moratorium on job losses in the merged entity as a condition of its approval for the transaction. Sibanye agreed to look at projects to extend the lives of shafts if it made economic sense and assess strategies that could save jobs, said Sibanye spokesperson James Wellsted, adding that Sibanye did not think the K3 and Siphumelele talks were as advanced as Magara said they were.

Included in the job-loss mitigation plans were the K3 and Siphumelele option as well as a feasibility study into funding the MK2 extension project at Lonmin’s Rowland mine, which Magara said Lonmin was continuing to fund on a shoestring budget pending third-party funding arrangements.

MK2’s success would absorb a number of miners from the Hossy shaft which is earmarked for closure, he said. “MK2 makes money at current prices and it is essential to keep Rowland’s volumes up and unit costs down. So any business person would want to advance it while it makes money. It’s safer that it was six months ago.”