Afplats reclassifies Leeuwkop resource (December 19, 2005)

Infill drilling and the results of a seismic survey have allowed African Platinum (APP-L, AFRPF-O) to upgrade resources on the Leeuwkop platinum project on the western limb of the Bushveld intrusive complex in South Africa.

The new estimates move some indicated resources into the measured category and a significant amount of inferred resources into the indicated category, in preparation for a final feasibility study on bringing the deposit into production.

Measured and indicated resources on the UG2 reef, the lower of the two major platinum-producing layers in the Bushveld intrusion, are now estimated at 64 million tonnes grading 3 grams platinum, 1.4 grams palladium and 0.5 gram rhodium per tonne. Compared with previous estimates, about 30 million tonnes has been moved into measured resources and 17 million from inferred into indicated.

Another 151 million tonnes, at 2.9 grams platinum, 1.3 grams palladium and 0.5 gram rhodium per tonne, is in the inferred category.

On the Merensky reef, where Afplats had previously reported only inferred resources, there is now an estimate of 34 million tonnes with 1.8 grams platinum, 0.9 gram palladium, 0.1 gram rhodium and 0.3 gram gold per tonne. Inferred resources have been increased to 178 million tonnes running 1.7 grams platinum, 0.9 gram palladium, 0.1 gram rhodium and 0.3 gram gold per tonne.

The previous figure for the inferred resource was 138 million tonnes, running 2.1 grams platinum, 1.1 grams palladium, 0.1 gram rhodium and 0.3 gram gold.

The three-dimensional seismic survey allowed improved correlation between drill holes for the resource estimate, confirming a comment Afplats chief executive Roy Pitchford made to analysts in Toronto earlier this year that “you can very easily see the Merensky and UG2” in seismic data. The geophysical mapping of the reefs will also allow better mine planning.

Planning to mine the resource, which dips at a shallow 9 angle that has frustrated earlier attempts to mine on the southern part of the western limb, centres on a low-profile room-and-pillar method. The UG2 resource is at about 1,260 metres below surface, and ventilation air will have to be chilled before being pumped down.

Prefeasibility work suggested production of 3 million tonnes annually from the UG2 reef, developing through the Merensky to allow later production from the upper reef. The mine would produce a concentrate for the Lonmin (LMI-L) smelter nearby. That rate of ore production would turn out about 180,000 oz. platinum, 93,000 oz. palladium, 31,000 oz. rhodium and minor gold.

Estimated capital costs were around R1.9 billion (US$290 million) and the project would take about 5.5 years to go into production.

Prefeasibility estimates put the cash production cost at R1,705 (US$263) per oz. platinum. The project has an internal rate of return of 14% at assumed long-term prices of US$700 per oz. for platinum, US$300 for palladium, US$1,000 for rhodium and US$400 for gold. Its net present value, after tax and at a discount rate of 10%, is US$74 million or R518 million (based on a rand value of US14.29, or seven to the U.S. dollar).

The final feasibility study is budgeted at R10.2 million (US$1.5 million).

Afplats also announced it had engaged South African mining contractor Shaft Sinkers to design the shaft and main underground workings, and manage their construction.