Afplats sets ambitious Bushveld goals
Article Date: Mar 10 2006African Platinum is mooting a £176 million funding to produce 300,000 oz annually by 2010 from Leeuwkop in South Africa.
Started by entrepreneur Phil Edmonds as Southern African Resources and now run by Roy Pichford, experienced ex-boss of Zimbabwe Platinum, AIM-quoted Afplats has completed a feasibility study into Leeuwkop in South Africa's platinum-rich Bushveld. According to Pichford, this suggests a potential resource of 53 million oz of platinum group metals (PGMs), which more exploratory work could double to over 100 million oz.
At present, Afplats, which Pichford says awaits Pretoria's approval of a deal with the local Bakwena people as black-empowerment partners, cites a 'proven mineable reserve' of 3.1 million oz. 'Probable reserves' of 3.8 million oz take reserves to 6.9 million oz and one crucial task is to convert as much as possible of the much larger estimated resources into the surer category of reserves.
With platinum trading at more than $1,000 an ounce and tipped by some analysts as heading towards $1,500, Afplats envisages a cash extraction cost of $320 an ounce. The feasibility report suggests a 21 per cent prospective internal rate of return for Leeuwkop at today's exchange rate of 6.25 rand to the dollar.
That rate assumes a conservative value for its basket of minerals – platinum, palladium, rhodium and gold – of $729 an ounce. If the Rand falls or the metals rise, the rate of return could increase significant.
Pichford says Afplats' long-term goal is to establish the 100 million oz resource and take Leeuwkop's production to one million oz a year for a long-life mine. The company, which has £11.5 million cash, says Leeuwkop needs £176 million to go into production by mechanised mining at depths of 1,350 metres.
At present, the plan is to fund this 70 per cent by equity and 30 per cent by debt, though Pichford says he does not rule out a different formula or accepting a 'strategic partner' if one comes forward. At 31.5p, many times 2003's 2.5p low but below 2004's 43p high, the shares have undoubted long-term speculative possibilities.
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