Southern Palladium close to getting mining right in Limpopo

Junior Australian miner Southern Palladium said on Monday it is a step closer to getting a mining right to develop a platinum group metals (PGM) project in Limpopo.

This is after the company submitted its mining right application to the department of mineral resources, transitioning it from a pure exploration entity to a development-focused company.

“This is an important development that provides the company with regulatory clearance to commence in-depth environmental expert studies and consultations. These steps will pave the way for the ultimate granting of the mining right,” the company said.

The miner is still conducting pre-feasibility studies on the Bengwenyama project, which has the potential to produce commodities such as palladium, rhodium, platinum and iridium.

The project is on the eastern limb of the Bushveld Complex, which contains more than 70% of the world’s known PGM resources.

According to the Geology for Investors website, the complex will not be mined out for the next 700 years at present extraction rates.

The company released findings of the geotechnical pre-feasibility study conducted by an independent consulting firm, which showed the viability of conventional and mechanised underground mining.

The primary purpose of the study conducted by Open House Management Solutions was to confirm the minimum allowable depth for commencing mining and to determine the optimal pillar layout for various mining methods.

“The study’s conclusions are reassuring. It indicates that mining operations at depths exceeding 50m underground do not pose a threat to surface infrastructure,” MD Johan Odendaal said in a statement.

He told Business Day in e-mailed answers to questions that potential capital expenditure and other related matters will be communicated in the second quarter of 2024 once the company completes pre-feasibility studies.

“I would prefer not to answer the question about capex and employment because we are currently focused on the pre-feasibility stage and exploring various options that could yield different outcomes in terms of the number of employees and capex,” said Odendaal.

Mining projects can have a fairly long lead time between exploration, development and production,  exposing players to potential risks as the industry is highly cyclical and capital intensive. Junior miners in particular can be more vulnerable in the long downward cycle unless bigger players with big balance sheets came on board.

Because of perceived inherent risks, junior miners tend to struggle to attract backing from big institutional investors.

Southern Palladium has a market valuation of nearly R500m on the JSE, where it has a secondary listing. Its primary listing is in Australia.

Junior miners generated R88bn in revenue in 2023, according to industry body Minerals Council SA, up from R54bn in 2018.

While some of this increase can be attributed to inflation, proportionally the junior sector output increased more than that of the overall mining industry in this period, according to the council, which has 35 junior members.

Correction: October 23 2023
An earlier version of this story said Southern Palladium already had the mining right when it has only applied for it.

mahlangua@businesslive.co.za