LYDENBURG – Platinum miners who launched ambitious new mines at the height of the boom are trying to scale down their projects and defer raising capital for as long as possible while waiting for market conditions to become more favourable.
It was however evident from presentations by Northam Platinum and Royal Bafokeng Platinum (RBPlat) last week that, with rising cost pressures and the potential for wage-related strikes to affect production, they have limited room to manoeuvre.
Northam chief executive Mr Glyn Lewis said the mine might have to raise some capital, “but it depends on circumstances”, and it was not yet possible to estimate how much.
The group’s new Booysendal mine near Mashishing is gearing up towards full production, while the older Zondereinde mine near Thabazimbi is working through poor ground conditions. Other cost pressures come from rising Eskom tariffs, social unrest and looming wage increases.
At the end of June Northam held R298,6 million in cash and had undrawn facilities of R750 million.
In the current financial year it expects to spend R350,2 million in capital on Zondereinde, including the cost of a smelter rebuild, and R532,1 million on Booysendal. There will also be working capital requirements.
Booysendal has cost R4 billion so far. In the late 2000s a much bigger min at a cost of R 8 billion was planned, but after the weakening in platinum prices from their mid-2008 highs, it was decided to construct Booysendal in smaller modules.
Asked about Booysendal’s second phase, Lewis said Northam had not focused on it because the industry would prefer a supply deficit, but some infrastructure had been included in the first phase of construction that would make it faster to bring a second module into production.
Power supply would be challenging for a second module, he added.
RBPlat, whose first phase of the Styldrift mine near Sun City is 32 per cent complete, has clipped R416 million off the original capital cost of R11,8 billion by making certain changes to the project.
It is also looking at ways to save the R2,4 billion cost of building its own concentrator, possibly through agreement with other companies with spare concentrator capacity, or sharing infrastructure costs with neighbouring mines.
So far, R2,1 billion has been spent on Styldrift, chief executive Mr Steve Phiri says. It is on schedule and in budget.
Changes to the mine plan mean it will now begin production ramp-up in July 2015 and reach steady state from June 2018.
Chief operational officer Mr Nico Muller says RBPlat is also looking at ways to optimise the second phase of Styldrift, including using infrastructure on neighbouring properties.
At RBPlat’s existing mine, the Bafokeng Rasimone Platinum Mine near Styldrift, R102 million has been saved on the original cost estimate for the Merensky replacement project.
RBPlat had an ungeared balance sheet and about R2 billion of funds available, including cash and unused debt facilities at the end of June.
Phiri says the group will raise more funds “when opportune”, probably in 2014/15, and until then it will fund Styldrift’s development internally.
“We are watching the situation so closely that whatever we’re going to be raising from the capital markets is going to be exactly to the point and far less than what we would have done if we had raised it earlier on,” Phiri says.
Though gold mines have experienced a wave of illegal strikes too, there has been more unease about labour relations in the platinum sector after the violence and police shootings at Lonmin’s Marikana mine a year ago.
The events at Marikana were attributed to social tensions arising from the migrant labour system, and pose a new challenge to the dominance of the National Union of Mineworkers (NUM) among the labour force from the Association of Mineworkers & Construction Union (Amcu).
A number of the platinum mining companies are negotiating two-year wage agreements with their trade unions.
“I don’t think we can afford much more than inflation, but whether there will be an understanding of that by the unions remains to be seen,” Lewis says.
In the past year Northam was hit by an illegal strike by rock-drill operators. Lewis says communities around the Booysendal mine are poor and have high expectations of the mines, and there have been incidents of protest.
Industrial relations at RBPlat’s western limb mines, where the NUM is still the majority union, have been more stable, though Phiri says there were issues last year and there will continue to be some.
“You don’t stop speaking to people when there is a problem,” he says. “You create a relationship for the sake of stability and partnerships.”
Report issued by Financial Mail
