Last year platinum prices reached $682(US) and demand hit a record hi gh of 2.4 million oz. The result? A handful of Canadian entrepreneurs scrambling to get a foothold on the many geological terrains in this country which have rocks similar to those known to host platinum group metals (pgms). These layered, ultramafic intrusives are scattered throughout the country, often in very isolated regions, so exploration and mine development costs are high. With about 83% of the world’s platinum coming from three South African producers — Rustenburg Platinum (1,300,000 oz in 1986), Impala Platinum (915,000 oz) and Western Platinum (135,000 oz) — and a further 10% from the U.S.S.R., the discovery of a major Canadian platinum deposit rich enough to mine would be a welcome source of supply. For investors accustomed to the speculative appeal of the gold exploration boom, this country’s dozen or so risk-oriented platinum plays appear to offer attractive potential in a market that, lately, has been nothing if not volatile.
But unlike gold, platinum is an industrial, as well as a precious metal. And prices are very much influenced by the delicate supply-demand balance. So what exactly is required to make a mine in such isolated areas as Cape Smith in the Ungava region of Quebec, the Muskox intrusion in the Northwest Territories, Fox River, Man., or Big Trout Lake in northern Ontario? What would the grade and tonnage of these deposits have to be, in order for them to be mineable? And how long before such a discovery could enter production?
Some of the answers may be found in Montana where North America’s first platinum-palladium mine, the Stillwater, recently came into production.
For Uncle Sam, mining is not the engine of economic growth which it is in Canada. Mining companies south of the border have to tread very softly. Terms like “smelter” are considered dirty words, and the slightest mention of them sends shivers up and down the spines of most politicians, especially those who represent parts of the country which pride themselves on their pristine natural environments — places such as Montana. To cope with this, U.S. mine operators tend to use euphemisms like “onward processing facility” when talking to the press about smelters. That’s the case at Chevron Resources and Manville Corp., which, along with Lac Minerals of Toronto, have spent $41 million over the past 20 years to start up the Stillwater mine. They accomplished this last March — ahead of schedule.
The mine lies in a windy mountain valley, just 20 miles north of Yellowstone National Park — the first national park established in the U.S. It is here, close to a major wilderness area, that the Stillwater partners want to build a smelter. The purpose would be to facilitate what they see as the long-term potential of developing a number of mines which, together, could rival the smallest of the big three South African producers. At the moment, however, Stillwater has the facilities to produce only about 35,000 oz per year. This will be achieved by mining only a 3-mile stretch of a 6-ft-wide pgm-bearing rock unit that has been traced for a distance of 28 miles and to an undetermined depth down dip (the zone dips at an angle of about 70 degrees to the north, away from the mountains). Although it pinches and swells both along strike and down dip, it is estimated there are 225 million oz of platinum and palladium in the deposit — significant enough to justify more mine exploration and development. Grades are about one ounce of pgm per ton (significantly higher than South African mines) with a platinum- to-palladium ratio of about 1-to-3 (well below those in South Africa). The Stillwater partners are mining at a rate of 500 tons per day, but the mill has a 700-ton capacity and the three partners are considering expanding the operation.
If this deposit were located at the end of a similar secondary, paved road in northern Ontario, it would surely be heralded as Canada’s “Hemlo of white gold.” It would indubitably have six or more mines on it, all developed by different companies, probably within 5-6 years. Possibly there would even be a major law suit over who owns the mines and local residents would be skeptical about the companies’ concern for the environment.
But Manville, which is basically an open pit industrial mineral miner, had the foresight back in 1967 to acquire a big land position in the Stillwater Complex where the presence of pgms has been known since the 1920s. As a result, the company is the only one (together with Chevron and LAC as equal partners) developing mines in the area. And at their current pace, they obviously intend to sustain development over the long-term.
Studies show that construction of a small smelting facility to treat sulphide concentrates from the 700-ton mill (which is now running at about 650 tons per day) would cost about $10 million(US) and could pay for itself in about two years, providing about 10 permanent jobs. As it stands, Stillwater has to spend $2,000 to truck a 20-ton lot of concentrates, containing valuable pgms, to a nearby rail station where it is hauled by train to New York City. From there the concentrates are shipped to a smelter in Belgium. (If this is carried out once every two days, an extra cost of $350,000 a year will be deducted from total revenues.) Five months later, metals are available for the company to sell on the open market. Clearly, having money tied up for this length of time is not the way for a serious platinum producer such as Stillwater to handle its affairs. A smelter would offer a much better return on the company’s money.
Maybe it is this long and laborious transportation process, together with Stillwater’s conservative approach to mine development, which causes many to think of the mine as a small- time operation. In reality it is the tip of a very big iceberg — big enough to provide the U.S. with all its strategic platinum and palladium needs for many years. (Last year U.S. demand, which is very different from its strategic needs, totalled 1.19 million oz, 300,000 of which were for investment purposes). As the company gains operating experience, costs will inevitably go down. If you convert the platinum, palladium, copper, nickel, gold, silver and rhodium values in the Stillwater concentrate into a platinum equivalent, current production costs are about $360 per oz. But these costs will drop below those of South African mines as Stillwater’s underground miners gain more experience, says mine superintendent Cherie Tilley. Despite their low labor costs (reportedly about $300 a month for the typical miner), South African operations must mine at great depths. Consequently expensive vertical shafts and refrigeration systems drive up costs. The capital costs of that country’s new 350,000-oz-per-year Northam Platinum mine, expected to be in production by 1991, is estimated to be about $350 million. This ore body exists at a depth of 6,500 ft. The Stillwater mine, on the other hand, has been developed by driving horizontal adits into the mountainside parallel to the strike of the orebody and using cut-and-fill methods with jacklegs.
McGill-educated geologist Michael Sharratt is senior director of exploration for Manville. He has been with the Stillwater project since 1967 when Manville started taking soil samples from the Beartooth Mountains in search of a platinum-palladium signature. When I visited the Stillwater mine in July, he explained why the company is taking a conservative approach toward mine development.
In the past 20 years Manville has seen exactly how volatile the platinum exploration game can be. While the company was collecting the thousands of soil samples which would finally lead them to the 6-ft-wide Johns- Manville Reef, platinum prices took one of their biggest nose-dives on record. That was in 1975 when the bottom fell out of platinum markets and prices plummeted to $36. Then, in 1981, under much different circumstances prices rose to more than $1,000 for the first time on record. Since then, threats of sanctions against South Africa
and a mineworkers’ strike last August have contributed to a longer- term, high-price situation. Last year, for example, prices averaged $462 an oz. These price increases have been attributed to a tight supply-demand situation — something that could be aggravated if there is an increase in demand from western European countries, which are scheduled to bring in stricter emission controls on automobiles in 1988. (One of the major uses of platinum is to assist a chemical reaction that converts carbon monoxide to carbon dioxide and water). But Sharratt is not about to allow the Stillwater project to come to the brink again because of a Montana public which becomes disgruntled by even the slightest of environmental screw-ups. “Yes, we’re taking a conservative approach to mine development,” he says, “but it’s going to pay off in the long run.
A lot has changed since the current site for the mine’s administration buildings was used by chromite miners. That was in the 1950s when chrome was mined from the west side of the Stillwater valley, stratigraphically below the j-m Reef. Now, under state law, mining companies are prohibited from emitting into the nearby Stillwater River any waste water from their mill; the tailings pond has to be lined with an “impermeable” plastic liner so that effluent can not seep into the groundwater system; all earth structures have to be landscaped and every proposed curve in the access road must be approved by the government. Even the color of paint used on the mine buildings had to be approved by the U.S. Forest Sevice so as not to clash with the surrounding environment. All these new regulations have added to the mine’s $41-million price tag. Not so new are the occasional power failures that periodically shut down the mill. Mill superintendent Gregg Hodges says it doesn’t happen often, but there was one 10-minute delay during my 1-day visit and another one previously, which lasted 16 hours.
An indication of the meticulousness of the company’s mine development work is its attempts to ensure that the wildlife of the Montana Foothills are kept away from the mine site. “We’re planning to put up a fence around the tailings pond to keep out the bighorn sheep,” Hodges says. “We’re afraid they’ll slip on the plastic liner and slide into the tailings pond.”
Now that Stillwater Mining has endured the labor pains of start-up, there is a perception that the mine has earned the acceptance of the local people. In fact environmental interest groups such as The Northern Plain Resources Council is taking most of the credit for what has been accomplished. Throughout, the aim has been to sustain economic development without sacrificing the environment.
The next step in bringing the mine up to 700 tons per day will be to develop the east side of the Stillwater River Valley. This would open up another three miles of strike length for mining and, conceivably, another 25,000 oz of platinum and 75,000 oz of palladium per year. Probably at least one other mine will be developed on the remaining 22 miles of strike. It will likely be located in another drainage valley, 10 miles to the west. However, since there is no infrastructure in this valley, it’s difficult to say how long it will take to build such a mine. But it will probably be built long before any platinum deposit remotely comparable in size to the j-m Reef is sufficiently outlined in Canada.
In the meantime small, short-term ventures such as Madeleine Mines’ Lac des Iles project, near Thunder Bay, Ont., could become very profitable. While the growth potential in the Thunder Bay area isn’t as obvious as that in Montana, the Lac des Iles project will likely produce about 17,500 oz of platinum per year, beginning in 1988, at an operating cost similar to that of Stillwater. But things could change once the Stillwater complex is developed to its full potential over the next 15-20 years. After that time, small mines will probably have a tough time competing in the event of low platinum prices — like in 1985 when prices averaged $292. Only deposits which are rich enough or cheap enough to mine because of economics of scale will be able to keep costs below these levels.
If the past is the key to the future, low prices will surely follow today’s high prices for the white gold — especially if the metal is not to be in oversupply.
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