JOHANNESBURG (miningweekly.com) – TSX- and NYSE-listed Platinum Group Metals (PTM) expects the South African government to grant a mining right for the Waterberg platinum group metals (PGMs) project shortly after the country’s lockdown ends on April 30.

PTM president Michael Jones on April 9 presented an update on the project’s development, which is currently being led by joint venture (JV) partner, platinum miner Impala Platinum (Implats).

He says it is possible for production to start in the first quarter of 2024, following decline establishment in the first quarter of 2021, with steady-state production expected from 2027.

As it stands, PTM owns 50% of the Waterberg JV, while Implats owns 15%; Hanwa 9.7%; Japan, Oil, Gas & Metals National Corporation (Jogmec) 12%; and Mnombo Wethu Consultants the balance.

These JV partners earlier in April executed a formal amended purchase and development option agreement with Implats, which entails Implats funding 100% of a implementation budget and work programme, valued at about R55-million.

Implats still has a few months to decide whether it wants to increase its shareholding in the project to 50.01% and contribute a total $165-million to the project’s development, including work programme spend. Jones expects Implats to make a construction decision during the third quarter of this year.

Jones explains in more detail that, under the purchase and development option, Implats may elect to increase its stake in Waterberg JV from 15% to 50.01% by buying an additional 12.195% equity interest from Jogmec for $34.8-million and earning a further 22.8% interest by making a firm commitment to an expenditure of $130-million in development work.

Implats made a strategic investment of $30-million in November 2017 to buy a 15% stake in the project.

The current work programme being executed on the project is aimed at further increasing confidence in the project and de-risking future ramp-up. Jones says this work is continuing remotely, in accordance with government restrictions to curb the spread of Covid-19.

The JV shareholders in December last year approved the project’s definitive feasibility study (DFS), which finds that the project will be one of the largest and lowest cash cost underground PGM mines globally.

The Waterberg mine, based in the Bushveld Complex stretching between South Africa’s Limpopo and North West provinces, can be a fully mechanised, shallow, decline access mine.

The DFS envisions a steady-state production rate of 420 000 oz/y of platinum, palladium, rhodium and gold (4E), and a 45-year mine life based on the current reserves. The reserves are currently defined as 19.5-million ounces of 4E.

In extended terms, the project has proven and probable mineral reserves of 187-million tonnes grading 3.24 g/t 4E for 19.5-million 4E ounces, using a 2.5 g/t 4E cutoff grade.

To date, PTM has spent $72-million on the project’s development that started in 2015. The length of the deposit area that will be mined is 8 km long. Jones says that ore will be conveyed to surface and sent to a central processing plant in the middle of three zones that will be mined.

MARKET PROSPECTS
The long-term market outlook for strong palladium demand and the potential for continued palladium supply deficits indicates a bright future for the Waterberg project, especially since the project will produce predominantly palladium.

South Africa produced 73% of the world’s platinum and 36% of the world’s palladium in 2018.

Even at a weak PGM basket price forecast of less than $1 000/oz, the Waterberg project can still generate at least $1-billion of revenue a year, at a steady-state production rate of 420 000 oz/y of 4E.

However, the current PGM spot basket price is $1 425/oz, which is almost 20% higher than the PGM basket spot price of $966/oz of 4E in 2016 when the first studies were published on the project.

The project can also deliver base metal (by-product) production including 16.7-million pounds of nickel and copper a year.

The palladium price is currently soaring above $2 000/oz, with demand mostly coming from the automotive sector.

The automotive sector in 2019 consumed 9.6-million ounces of palladium, representing 84% of total demand, which was 11.5-million ounces.

South Africa in 2019 produced 2.65-million ounces of palladium, representing 38% of global mine supply, which was 6.89-million ounces.

Palladium experienced a 1.1-million ounces deficit in 2019 and, prior to Covid-19, was expected to be in a significant deficit in 2020. However, the deficit would have narrowed slightly considering lower automotive production in most regions of the world, but China is already back to 70% of its automotive production capacity.

“PTM and Implats will continue working hard towards its next major milestone of obtaining the mining right for the Waterberg project,” Jones concludes.