Implats opts out of undeveloped Waterberg deposit
The move by SA's number three PGM supplier leaves Canada's PTM with some tough decisions
Impala Platinum has opted not to pursue majority ownership of the undeveloped Waterberg platinum group metals (PGMs) prospect in SA and has instead kept its minority stake.
The Waterberg prospect in northern Limpopo is owned by Canada’s Platinum Group Metals (PTM), a company that tried and failed to bring a mine into production immediately south of the Sun City gambling resort. That mine and concentrator complex, called Maseve, was sold to Royal Bafokeng Platinum.
The decision by Implats, which has decades of experience in building large mines and processing plants, and which has a far larger balance sheet and access to the investment market than PTM, will be a set back for the Canadian company.
PTM could consider finding another company to develop the project. Given its experiences at Maseve, it's questionable whether it would try to go it alone in building a mine and concentrator at Waterberg.
The project was forecast to cost $874m or nearly R15bn to bring into steady state production.
Implats, SA's third-largest supplier of PGMs, had the option to earn a 50.1% ownership stake in Waterberg, a deposit that lies in the upper reaches of the Northern Limb of the Bushveld Igneous Complex, the biggest known source of the metals and chrome.
Implats has been involved in studying the Waterberg deposit since October 2017. The deposit was seen as a way for the company to potentially add shallow resources to its portfolio and which could be mined mechanically, a cheaper form of mineral extraction than deep-level, labour-intensive mining.
Implats bought its 15% for $30m.
However, after the completion of a definitive feasibility study into the project in December 2019 and intense scrutiny of the economics of the project, Implats decided not to pursue its option to take a majority stake in the venture.
Implats said on Wednesday it would retain its 15% in the venture, which would entail funding its pro rata portion of future costs, and that it would maintain its first right of refusal for the offtake of concentrate coming from the project in a water-scarce area once it's completed.
“Costs associated with further study and optimisation work to de-risk the project implementation programme will continue to be funded by Implats, up to a maximum of R55m as previously announced, with planned studies expected to be complete by mid-August 2020,” the company said.
Project timing is out
The decision not to take the majority stake included a view on the long-term PGM market combined with the demands on Implats’s balance sheet to fund it stake, and the returns on the investment at a time when the company wanted to remain in the strongest possible financial position and pay shareholders.
The definitive study indicated Waterberg would produce 420,000oz of platinum, palladium, rhodium and gold a year as well as 7,600 tonnes of nickel and copper annually.
In a global market where demand was uncertain because of the coronavirus pandemic and where other major PGM projects were waiting to start, the addition of these ounces had to be carefully considered and timed.
Anglo American Platinum has two large expansion projects under study, Russia's Norilsk Nickel has large palladium projects on its books, Ivanplats has a partially built mine south of Waterberg and Northam Platinum has slowed work on returning its large Eland mine to production.
Another consideration was the lack of appetite from investors to finance large new mines from scratch, Implats said.
“After taking these considerations into account, the Implats board resolved that the group will not exercise its option to increase its shareholding in the project at this time,” the JSE-listed company said.
Implats spent R11bn buying Canadian miner North American Palladium in a deal it unveiled in December 2019, giving it offshore exposure and shallow, mechanised mining operations.
PTM is the 50.2% owner of the Waterberg joint venture
The Waterberg venture included PTM, Implats, Japan Oil, Gas and Metals National Corporation, Hanwa and Mnombo Wethu Consultants. Japan's Hanwa would be the marketer and seller of the metals coming from the project.