Resource titan, Robert Friedland on the future of Platreef
After the Toronto Stock Exchange rang the closing bell today, Ivanhoe Mines (IVN.TSX)announced they were resuming development work on Platreef, their 75.7 million ounce (Indicated + Inferred) platinum-gold-nickel-copper project in South Africa.
The company says it has sent out formal notifications to provincial authorities and landowners to return to work. They have begun moving the required plant and earthmoving equipment back to the site of the Platreef’s first planned production shaft.
The company was forced to halt development at the project on May 26th pending the receipt of the mining right. Although the right was granted on May 30th, the Department of Mineral Resources didn’t formally activate it until November 4th.
Shares fell from $1.80 to an all-time low of $0.78 per share by the end of October as Bloomberg and other media outlets speculated that Friedland would get caught in the turmoil in South Africa that has crippled the country’s mining sector.
They were wrong and now the billionaire entrepreneur (Friedland), who has founded and developed some of the largest mining projects in the world, can move his latest project towards production in 2018.
Ivanhoe’s CEO, Lars-Eric Johansson says that a principal priority for them continues to be the completion of the excavation at the box cut to establish access for the construction of the large concrete surface collar for Shaft #1. The collar will also serve as a base that will anchor the headframe structure and house the ventilation opening.
Shaft #1 will be 7.25 metres in diameter and will reach a total depth of almost 1 kilometre (975 metres). It will be capable of hoisting 2.5 million tonnes of material annually. It is planned to be used in 2017 to collect a mineralized bulk sample for metallurgical testing from the 800-metre level of the Flatreef Deposit.
Ivanhoe is currently working on finalizing a “phase 1″ pre-feasibility study that will optimize and refine the March 2014 PEA which showed an initial production phase of 4 million tonnes per annum (ramping up to 8 million over time). They expect the pre-feasibility out before year-end and will begin a full feasibility study early in 2015.
Given the drop in metal prices and the large capital investment to build the full-scale project, the company has been developing a staged approach to its development to ensure its economic viability.
The company currently has $100 million dedicated to the Platreef project and says that will see them through at least the next 12 months. The $100 million is what’s left from a 2011, $280 million investment by a Japanese consortium which saw them acquire a 10% interest in the project.
The company says it has spent $236 million on Platreef since getting involved in it in 1993.
Mr. Friedland’s Statement:
“For a long time now, the development of our Platreef Project has been a destiny waiting to be fulfilled. It is said that great mines are ‘made’, as much as they are ‘found’. Now, thanks to the support of our partners – including the black economic empowerment beneficiaries representing the residents of 20 eligible Mokopane area communities, our eligible employees and South African entrepreneurs, plus our Japanese investors – Ivanhoe’s Platreef team is ready to begin building another great mine.
All of our stakeholders will share in the realization of the promise of our discovery on the Platreef.
Our Platreef story began more than 20 years ago when Bill Hayden, the Australia-based international geologist who founded Platreef Resources in 1988, approached Ivanhoe Capital to discuss potential exploration financing. We first met in 1993, one year after he had lodged his second application in South Africa for prospecting rights to the Turfspruit and Macalacaskop properties north of Mokopane that, as we now know, hold the mother lode for our Platreef Project.
Mr. Hayden’s pitch coincided with preparations by one of Ivanhoe Capital’s affiliated companies, African Minerals Corp., to organize its own reach for opportunities in southern Africa’s mineral fields. We discovered we shared a keen interest in finding a door to South Africa’s platinum club on the Bushveld.
We agreed that an Ivanhoe holding company would acquire a 51 percent stake in Platreef Resources. Mr. Hayden, Platreef’s managing director, also joined the African Minerals management team in 1993 and later became the company’s president in 1996.
While South Africa rolled out its peaceful liberation revolution, African Minerals combed through its portfolio of prospects, including extensive diamond-prospecting rights in the former Lebowa Homeland, which now is part of Limpopo province. At the same time, African Minerals also was monitoring the start of a new platinum mine on an adjacent property, on the Bushveld’s then little understood Platreef, which bolstered African Minerals’ resolve to pursue its own platinum opportunity.
That opportunity was sealed in 1998 as part of a corporate amalgamation in which the 51% interest in Platreef Resources was transferred from the Ivanhoe holding company to a restructured African Minerals Ltd. – which became the trailblazer for today’s Ivanhoe Mines. Mr. Hayden led the restructured company as its first president.
In January 2000, the Platreef Resources subsidiary finally received its long-sought prospecting permit for Turfspruit and Macalacaskop, authorizing the company’s search for base and precious metals. African Minerals exercised its option to acquire 100 percent ownership of Platreef Resources and quickly hit the ground with its initial exploration program.
Early years of exploration identified a significant, shallow resource of platinum-group metals mineralization. But it was the company’s decision to launch a deep exploration program in 2007, prompted by deep-drilling success reported elsewhere on the Platreef, which led to the breakthrough discovery of the Flatreef deposit three years later.
Flatreef was a prize right out of a geologist’s dream, in more ways than one. It particularly held special significance for our project manager, geologist Sello Kekana, who was born and raised on the very same Turfspruit farm in Limpopo where the discovery was made.
The tremendous size and remarkable thickness of the Flatreef deposit is continuing to be revealed as a game-changing development for the platinum industry in South Africa. It also is a company-maker for Platreef Resources. Although recently renamed Ivanplats (Pty) Ltd., the company preserves its singular, 26-year quest firstly to discover the mineral trove and now to develop the Platreef Project.
Flatreef has been independently confirmed as one of the world’s major deposits of platinum-group minerals. An independent study has projected that our Platreef Project could become Africa’s lowest-cost producer of platinum-group metals. The discovery merits the superlatives that it inspires.
The company’s 2010 discovery attracted the discriminating eye of ITOCHU Corporation, one of Japan’s leading trading houses, which acquired an initial strategic, two-percentage-point interest in the Platreef Project. After meticulous assessment, ITOCHU followed up nine months later, on behalf of an influential Japanese trade consortium, expanding its key partnership stake to 10 percent. The other consortium members are Japan Oil, Gas and Metals National Corporation, a Japanese government agency; Japan Gas Corporation; and ITC Platinum Development Ltd., an ITOCHU affiliate.
As Platreef partners, they know the science of mineral processing and refining. They also have an acute appreciation of just how much platinum and palladium this urbanizing planet is going to require to accommodate the growth of cities and to maintain a healthy global environment in coming decades.
We have built a cohesive, supportive team that represents the aspirations of our new shareholder partners, in South Africa and internationally, and which has the knowledge and experience to transform our Platreef discoveries into a state-of-the-art, underground mine. In the process, team members will create potentially transformative opportunities for themselves, through added skills and advancement. But they also will create opportunities for hundreds of others, including the historically disadvantaged, to achieve more of their personal potential through meaningful jobs in a resource industry that will remain one of the principal drivers of the ongoing economic transformation of South Africa’s economy for as far as any of us can see into the future.
We are committed to making Platreef an industry model of safety and productivity and an example of responsive leadership in providing jobs, skills training, new business opportunities, sustaining community benefits and effective environmental management.
We are implementing Platreef’s approved social and labour plan and also honouring the substance and spirit of South Africa’s Mining Charter.
At Ivanhoe Mines, and within the Ivanhoe group, we’re proud of our ‘people principle’. We know that it is our people who are our true wealth. They are the women and men who explore, build, operate, maintain, instruct and lead. They personify the ideals of black economic empowerment. Their right to pursue their ambitions is fundamental to our enterprise.
Teamwork, and the commitment to this principle, also were instrumental in the earlier successes of the original Ivanhoe Mines during its initial mine-development work at the world-scale Oyu Tolgoi discovery in Mongolia. Today, 94 percent of the Oyu Tolgoi jobs are held by Mongolian nationals, many of whom the company also trained in qualifying mining skills.
In South Africa, the parent company of our Platreef Project assumed the Ivanhoe Mines name in 2013. We are proud to have shared our 14 years of operating challenges and achievements in Limpopo with an expanding field of supportive stakeholders who see international investment and professionally managed development of natural resources as one key to future gains in opportunity, prosperity and sustainability for Mokopane area residents.
Dr. Patricia Makhesha, who became managing director of our Platreef Project subsidiary, Ivanplats, last August, is a former transformation executive in South African industry who spent more than a year as an Ivanhoe consultant working cooperatively with Mokopane area communities and helping to develop Platreef’s broad-based, black economic empowerment structure. She is assembling a senior management team, which already includes Mr. Kekana.
Mr. Hayden remains a director of Ivanhoe Mines, contributing guidance informed by his career experience in Africa. Our chief geologist and discovery field leader, Dr. David Broughton, continues to head the company’s exploration efforts.
In Mokopane, our South African contractors are marshalling workers and equipment. The job of actually building our Platreef mine is about to get underway.
And perhaps one day Ivanhoe Pictures will have the script and the cast to tell the whole, made-in-South Africa Platreef story.”
Share Price: $1.05
Shares Outstanding: 692 million
Market Capitalization: $726.6 million
Cash: $223 million
Debt: $25 million
Enterprise Value: $530 million
By Travis McPherson
Disclosure: Author is long Ivanhoe Mines and as a result is very biased. This is not investment advice. Always do your own due diligence.