Platinum’s future looks bright

Vancouver — If silver’s moniker is the poor man’s gold, platinum’s buoyant price performance must certainly place it in the running as a much richer man’s precious metal. However, despite the lofty price, a limited number of North America explorers are actually committed to hunting it.

Platinum and its sister metals, palladium and rhodium, performed well through 2006 with the former averaging more than US$1,100 per oz. so far this year.

Platinum group metals (PGM) marketing group Johnson Matthey has forecast a 5% rise in 2006 platinum demand to a record high level of 7.02 million oz. Supply for the year is also expected to rise, about 350,000 oz., to around 7 million oz. The metals specialist cites significant growth in the autocatalyst sector to offset dropping jewellery demand due to higher prices.

Recent rumours of an exchange-traded fund (ETF) linked to the platinum market gave the metal a brief spike to near the US$1,400 per oz. level on the spot market, although speculation had calmed at presstime with the price settling back to around US$1,160 per oz. Johnson Matthey predicts a platinum trading range of US$980-US$1,200 per oz. into the middle of next year.

World platinum output is dominated by production from South Africa’s Bushveld district, which is expected to supply about 78% of this year’s output, or about 5.5 million oz. The dominant operator in the region is Anglo Platinum (AGPPY-O, ANP-L, ANANP-J), which is expected to produce about 2.7 million oz. in 2006. Impala Platinum (IMPUY-O, IPLA-L, IMPO-J), which operates in Zimbabwe’s Great Dyke region as well as the Bushveld, produced 1.85 million oz. in 2006.

Other significant Bushveld-region producers include: Lonmin (LNMIY-O, LMI-L, LOLMI-J), with output of about 1 million oz. in fiscal 2006; Aquarius Platinum (AQPTY-O, AQP-L, AQP-J) supplying about 250,000 oz. platinum in its latest fiscal year and Northam Platinum (NMPNF-O, NHM-J), mining about 200,000 oz. annually.

The Bushveld layered igneous complex in northern South Africa hosts about 75% of the world’s PGM resources. The 350-km-diameter structure was formed from multiple injections of magma into a chamber where it slowly cooled, allowing for segregation and “layering” of different minerals during the crystallization process. Precipitation of certain minerals resulted in the accumulation or concentration of certain elements, such as platinum, palladium, chromium and vanadium, into economic deposits.

Main producing areas of the Bushveld complex are around its rim as the centre is deeply covered by rock sequences. Two principal mineralized horizons, the Merensky and Upper Group 2 (UG2) reefs, are being worked in the eastern and western limbs of the complex. The layers are quite thin, usually less than 1 metre, requiring labour-intensive underground mining.

A third PGM-rich layer, the Platreef, occurs in the northern limb of the Bushveld and is generally much wider (5-90 metres) allowing for some open-pit mining.

A few North American juniors are poised to enter the realm of producers in South Africa. Platinum Group Metals (PTM-T, PTMQF-O) is advancing its Western Bushveld joint venture with Anglo Platinum, each holding a 37% interest, with the remainder held by Africa Wide Mineral Prospecting & Exploration, a local Black Economic Empowerment (BEE) company.

With its prefeasibility study nearing completion, the Western Bushveld JV recently tabled a revised resource estimate for the project with 44.7 million measured and indicated tonnes averaging 4.4 grams combined platinum, palladium, rhodium and gold per tonne hosted in both the Merensky and the UG2 reefs (about 6.29 million contained ounces combined platinum, palladium, rhodium and gold). An additional 15 million inferred tonnes at 4.15 grams combined platinum, palladium, rhodium and gold was also reviewed.

Canadian group, Anooraq Resources (ARQ-V, ANO-X), another partner with Anglo Platinum, has begun a prefeasibility study on its Ga-Phasha PGM joint venture (50-50) in the northeastern limb of the Bushveld. The JV is evaluating an underground operation targeting the UG2 reef to an expected depth of about 650 metres, but will also continue to drill test the Merensky reef. The Anooraq-AngloPlat JV also holds projects on the northern limb of the Bushveld where is has extensively drilled the Drenthe and Overysel North deposits.

Anooraq became a BEE company in mid-2004 through a reverse-takeover transaction by Pelawan Investments.

AfriOre (AFO-T, AFOFF-O, AFO-L), which holds 74% of the Akanani Platinum project in the northern limb, has been targeted by Lonmin recently with an all-cash, $8.75-per-share takeover bid.

Recent resource estimates at Akanani reviewed 249.1 million inferred tonnes grading 1.8 grams platinum, 2 grams palladium, 0.2 gram rhodium and 0.2 gram gold, plus 0.24% nickel and 0.14% copper. A current feasibility study on the deposit is expected to be complete in the first quarter of 2007.

Recently listed Platmin (PPN-T, PPN-L) raised more than $50 million in its initial public offering. The company plans aggressive exploration programs on its four PGM projects in the Bushveld, three in the eastern limb (Mphatlele, Grootboom and Loskop) and Pilanesberg in the western limb.

Other regions

Second among the world’s platinum producing regions is Russia’s Noril’sk complex in northern Siberia, contributing about 13% or 895,000 oz. in 2006.

The massive open-pit mining, smelting and refining complex is operated by Norilsk Nickel (NILSY-O, MNOD-L), the world’s largest nickel and palladium producer. Byproduct copper, platinum and cobalt also contribute significantly to operations.

Accounting for about 4% of global platinum output, Canada is a significant contributor of the metal as byproduct from a number of large primary nickel mines, specifically in the Sudbury basin, northern Manitoba and in northern Quebec’s Raglan area. Companhia Vale do Rio Doce (RIO-N) subsidiary Inco and Falconbridge successor Xstrata (XTA-L, XSRAF-O) produced 172,000 oz. and 48,750 oz. platinum, respectively, in 2005.

Additionally, North American Palladium’s (PDL-T, PAL-X) Lac des les mine north of Thunder Bay, Ont., also produces some byproduct platinum plus gold, copper and nickel.

Pacific North West Capital (PFN-T, PAWEF-O), in a 50-50 joint venture with Anglo Platinum, continues to explore its River Valley project, located 65 km northeast of Sudbury. The project hosts a measured and indicated resource of 30.5 million tonnes grading 0.97 gram palladium and 0.34 gram platinum plus minor gold.

The United States contributes 2% to world platinum production from Stillwater Mining’s (SWC-N) operation in Montana. The primary palladium mine produces about 130,000 oz. platinum per year.

A couple of polymetallic projects in northeastern Minnesota that are being evaluated contain significant platinum resources. PolyMet Mining’s (POM-V, PLM-X) NorthMet project has a minable resource of 808 million tonnes of 0.43% copper, 0.11% nickel, 0.12 gram platinum, 0.44 gram palladium, 0.06 gram gold and 1.5 grams silver. A recently completed feasibility study indicates positive economics for a 29,000-tonne-per-day open-pit operation on a reserve of 165 million tonnes grading 0.31% copper, 0.09% nickel, 0.008% cobalt, 0.28 gram palladium, 0.08 gram platinum and 0.04 gram gold.

Franconia Minerals (FRA-V, FRALF-O) is advancing exploration on its Birch Lake project, located just northeast of NorthMet. A resource estimate and preliminary economic assessment modelled potential underground development of two deposits producing 74 million lbs. copper, 19 million lbs. nickel, 2.9 million lbs. cobalt, 7,400 oz. gold, 33,000 oz. platinum and 68,000 oz. palladium over a possible mine life of 24-26 years.

The lion’s share of global platinum exploration spending is understandably focused on South Africa, with some of the other regions being targeted including Zimbabwe, Canada, U.S., Russia, Australia and Finland.

In its Platinum 2006 Inte
rim Review, Johnson Matthey predicts: “Platinum demand is expected to climb higher in 2007, continuing the long-term trend in annual growth.”