PLATINUM MINING IN SOUTH AFRICA May 2009 Platinum Mining in South Africa Contents May 2009 Sources of platinum 3 South Africa 3 Russia 3 North America 4 Canada 4 United States 5 Zimbabwe 5 Global Market 7 Platinum supply 7 Platinum demand 7 Automotive demand 7 Jewellery demand 8 Industrial demand 8 Platinum investments 8 Platinum price 8 Outlook 9 Legislative and policy environment 11 Major platinum projects currently under development in South Africa 18 Main participants 22 Anglo Platinum 22 Impala Platinum 32 Lonmin 42 Northam Platinum 45 Aquarius Platinum 48 African Rainbow Minerals Platinum 52 Royal Bafokeng Resources 56 The material contained in this report was compiled by Paul Serebro and the Research Unit of Creamer Media (Pty) Ltd, based in Johannesburg, South Africa. To contact Creamer Media call +27 11 622 3744 or email [email protected]. www.researchchannel.co.za Platinum Mining in South Africa Contents May 2009 Junior platinum companies and explorers 58 Jubilee Platinum 58 Lesego Platinum 59 Mmakau Mining 60 Nkwe Platinum 61 Platmin 63 Platinum Group Metals 65 Ridge Mining 67 Wesizwe Platinum 68 Xstrata 69 Main sources 70 www.researchchannel.co.za Platinum Mining in South Africa May 2009 Abbreviations Aim – Alternative Investment Market AQPSA – Aquarius Platinum South Africa Arm – African Rainbow Minerals ArmGold – African Rainbow Minerals Gold ASACS – Aquarius Platinum South Africa Corporate Services ASX – Australian Securities Exchange BEE – black economic empowerment BFS – bankable feasibility study Bits – bilateral investment treaties BMR – base metals refinery BRPM – Bafokeng-Rasimone Platinum Mine CTRP – Chromite Tailings Retreatment Plant DME – Department of Minerals and Energy DMS – dense medium separation plant DPF – diesel particulate filter DTI – Department of Trade and Industry Ebit – earnings before interest and tax Ebitda – earnings before interest, tax, depreciation and amortisation EMPR – environmental management programme report ESOP – employee share ownership plan ETF – exchange-traded fund GFSA – Gold Fields South Africa HDSA – historically disadvantaged South Africans ICSID – International Centre for the Settlement of Investment Disputes IGC – International Gold Fields Implats – Impala Platinum IRS – Impala Refining Services JCI – Johannesburg Consolidated Investments JSE – Johannesburg Securities Exchange Kalplat – Kalahari Platinum Lonplats – Lonmin Platinum LSE – London Stock Exchange www.researchchannel.co.za 1 Platinum Mining in South Africa May 2009 MCP – magnetic concentration plant MMZ – main mineralised zone MPRDA – Mineral and Petroleum Resources Development Act MSB – massive sulphide body NYSE – New York Stock Exchange oz – ounces PCMZ – peridotite chromititic mineralised zone PGM – platinum-group metal PLA – Platinum Australia PSA – pool and share agreement PTM – Platinum Group Metals PMR – Precious Metals Refinery RBH – Royal Bafokeng Holdings RBN – Royal Bafokeng Nation RBR – Royal Bafokeng Resources RBMR – Rustenburg Base Metals Refiners RPM – Rustenburg Platinum Mines SAHRC – South African Human Rights Commission Samrec – South African Mineral Resources and Mineral Reserves Code SavCon – Savannah Consortium SMC – Selous Metallurgical Complex TSX – Toronto Stock Exchange UG2 – Upper Group 2 UK – United Kingdom US – United States WBJV – Western Bushveld JV 3PGM+Au – three platinum-group metals – platinum, palladium, rhodium and gold 4E – four element platinum-group elements – platinum, palladium, rhodium and gold www.researchchannel.co.za 2 Platinum Mining in South Africa May 2009 Sources of platinum Platinum is produced in five countries in the world. Of ment and addition of existing and new magma as the these, South Africa is by far the largest producer, ac- case may be, producing a repetitive mineral layering. counting for over 75% of global output in 2008. In sec- ond position is Russia, which produced almost 14% of Mining company Impala Platinum, in its review of the global platinum output in 2008, followed by Canada, geology of the Bushveld Complex, indicates that indi- the United States and Zimbabwe. vidual layers or groups of layers of the Bushveld Com- plex can be traced for hundreds of kilometres. This Platinum supply by region 1999 – 2008 layered sequence, the Rustenburg Layered Suite, com- million ounces prises five principal zones, the Marginal, Lower, Criti- cal, Main and Upper Zones. The Bushveld Complex, is, South Africa Russia North America Others million oz horizontally, roughly clover-leaf shaped, consisting of 8 four compartments or limbs – western, eastern, north- 7 ern and southern ¬– in order of economic importance. 6 The Bushveld Complex is unique in both size, covering 5 an aerial extent of some 66 000 km², and the economic 4 importance of its minerals. Contained within the well- 3 layered ultramafic to mafic succession are two horizons in the Critical Zone that host economically exploitable 2 quantities of platinum group metals (PGMs), namely the 1 Merensky Reef and the underlying Upper Group 2 (UG2) 0 Reef. These two economic horizons can be traced for 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 370 km around the complex and are the focus of mining Source: Johnson Matthey Platinum 2008 Interim Review operations from which the PGMs – platinum, palladium, rhodium, ruthenium and iridium – are recovered, togeth- South Africa er with quantities of gold, nickel, copper and numerous other metals and compounds. Below the UG2 Reef are Platinum experts Johnson Matthey show South Afri- numerous other chromitite layers that are mined for ca to have produced 4,78-million ounces of platinum chromium, as their PGM content is too low. in 2008, which was 5% down on the country’s platinum production in 2007. A third PGM-rich ore body, the Platreef, which extends over a distance of 30 km, is found only on the northern The country’s platinum mining operations are concen- limb, in the vicinity of Mokopane in the Limpopo Prov- trated on the extremely large, two-billion-year-old, sau- ince. This ore body, first mined in the 1920s, was not cer-shaped, layered igneous intrusion, known as the exploited on a large scale until 1993. Bushveld Complex, which occurs in the northern part of the country, traversing the North West, Limpopo and Mpumalanga provinces. PGM Supplies: South Africa ‘000 oz 2007 2008 Professor Grant Cawthorn indicates, in a paper on the platinum and palladium resources of the Bushveld Platinum 5 030 4 780 Complex (published in the South African Journal of Palladium 2 770 2 525 Science), that it is generally understood that the Bush- veld Complex was formed by the repeated injection of Rhodium 696 620 magma into an enormous chamber. Owing to the huge Source: Johnson Matthey Platinum 2008 Interim Review volumes of magma involved, cooling and subsequent mineral crystallisation out of the magma was a slow Russia process. Different minerals were formed as the magma cooled. These minerals accumulated into sub-horizon- Johnson Matthey indicates that Russia produced 855 tal layers, building from the base of the chamber. The 000 oz of platinum in 2008, which was down on the 910 processes were repeated by the intermittent replenish- 000 oz produced in 2007. www.researchchannel.co.za 3 Platinum Mining in South Africa May 2009 Platinum mining in Russia can be traced back to 1823 mined in South Africa, but much more variable in grade when large alluvial platinum deposits were discovered and composition. in the central Ural Mountains. By the end of the nine- teenth century, these alluvial deposits had become the Other sources of platinum production include two al- world’s dominant source of platinum. luvial mining operations in the Russian Far East. The first and larger of the two operations, the Kondy- By the late 1920s, however, the most easily accessi- or mine, is located In the Ayano-Maisk region of ble high-grade placer deposits had largely been ex- Khabarovsk. Commercial exploitation of the deposit hausted and mining has since dwindled to a handful of by a local gold mining company, the Amur artel, be- small-scale dredging operations producing very mod- gan in 1984. The smaller Koryak deposit is situated in est quantities of platinum. Kamchatka on the Pustaya river system, which drains an area of PGM-bearing zoned ultrabasic rocks. Full- Johnson Matthey reports that there is a renewed in- scale mining of the deposit by the Chaibukha mining terest in the Urals as a potential future source of plati- artel, in conjunction with Koryakgeolodobycha, start- num. Modern extraction methods may make the ex- ed in 1995. ploitation of previously overlooked alluvial and placer deposits possible. In December 2008, it was reported that Russian Presi- dent Dmitry Medvedev had signed into law a Bill abol- Almost all of Russia’s PGMs are supplied by three min- ishing state firm Almazjuvelirexport’s monopoly on ing companies and from state reserves. State PGM exporting PGMs. Previously, all PGM producers and stocks remain a state secret, and nearly all PGMs in stock holders, including the world’s largest palladi- state stocks are believed to have been mined Norilsk um miner Norilsk Nickel, the central bank, and State Nickel. precious metals and gems repository Gokhran, had to export the metals through Almazjuvelirexport for a PGM Supplies: Russia ‘000 oz fee. The Russian government believes that the move was necessary as part of the process of liberalising 2007 2008 Russia’s previously secret PGM market. The Bill took Platinum 910 855 about four years to pass through both chambers of parliament. Palladium Primary production 3050 2940 North America State sales 1490 800 Rhodium 90 90 Johnson Matthey reports that platinum production in Source: Johnson Matthey Platinum 2008 Interim Review North America in 2008, at 340 000 oz, was up on the previous year’s production of 325 000 oz. However, palladium supplies fell by 4% to 950 000 oz, reflecting Norilsk Nickel dominates Russian PGM output, pro- lower production from Stillwater in the United States ducing platinum, palladium and other minor PGMs and North American Palladium in Canada. from its copper-nickel mining and smelting complex in northern Siberia.