Northam CEO Paul Dunne says the Kukama project lends itself to scaling up or down. Picture: MARTIN RHODES
Northam CEO Paul Dunne says the Kukama project lends itself to scaling up or down. Picture: MARTIN RHODES

Northam Platinum is restarting the mothballed Eland mine at a cost of R2bn as part of its plans to improve operational diversification and reach 1-million ounces of platinum group metal (PGM) production a year.

Contrary to the trend of closures and job cuts in the SA mining industry, Northam is investing heavily in new projects and the Eland mine will create 2,800 jobs.

Northam bought the Eland mine from Glencore for R175m in February 2017, with the deal including the mine, a large 250,000-tons-per-month concentrator plant, and a fleet of 100 mining vehicles. Glencore inherited the mine when it took over Xstrata.

In exchange, Glencore secured the right to market all Northam's chrome, which will total more than one millions tonnes by 2024. Chrome is a by product of Northam's mining operations.

Xstrata bought the Eland property from Loucas Pouroulis for $1bn and invested a similar amount in building the mine and processing plant. Analysts say this was the most expensive deal in SA's platinum mining history. The mechanised mine was unprofitable and was stopped in 2015.

Northam intends returning it to a conventional mine, using teams of miners to drill and blast, but deploying a highly mechanised approach to the development of tunnels and access to the reef, creating what is known in the industry as a hybrid mine.

The key to success is better managing the dilution coming from waste rock above and below the reef to deliver as much PGM per tonne of rock to the mill as possible. Xstrata delivered about one gram a tonne, far below the 3.7 grams/tonne Northam is targeting as it ramps up production over seven years, said Damian Smith, Northam's group geologist.

Northam is the first company to test a potentially industry-changing technology developed by JSE-listed Master Drilling, which has built a flexible mobile tunnel-boring machine that can dig tunnels rapidly. The test work will be done at Eland.

Under the leadership of CEO Paul Dunne, Northam has set itself a target of 1-million ounces a year of PGMs. 

“The project further diversifies the group’s operations and production capacity and does so efficiently by utilising an extensive existing capital footprint. Kukama is a project that lends itself to scaling up or down and will form the production base for the broader Eland complex,” Dunne said on Wednesday.

With its Zondereinde mine near the town of Northam and its Booysendal operation near Steelpoort delivering 850,000oz of metal in the future, the addition of Eland’s 150,000oz will bring the company to its target.

An analyst noted Northam was one of the major platinum miners who was investing counter to the low cycle in the metal's price, positioning itself to reap the benefits when demand overtook supply in coming years after a decade of under-investment in the South African platinum industry, the world's largest source of primary PGMs.

Northam forecasts that Eland will reach output of 100,000oz of PGMs by 2025 and four years later reach steady-state production of 150,000oz.

The mine will deliver free cash flow in its fourth year of operation, according to the study, and generating R1bn in free cash flow in steady state.