The new Northam Platinum now consists of a combination of the steady-state Zondereinde platinum mine and the greenfield Booysendal project.

Zondereinde still has a couple of decades of mining ahead of it, and just the first slice of the massive 103-million-ounce Booysendal resource alone has a quarter- century mine life.

In funding the new Booysendal project, the JSE-listed Northam Platinum is taking the view that the minimising of debt on the company’s balance sheet is the best way to navigate the current volatile platinum-group-metals (PGMs) market.

Northam plans to raise equity in a rights issue, use cash flow from its Zondereinde mine and obtain some medium-term debt in order to provide the initial R3-billion for the first module.

In return, Booysendal offers the resources to turn Northam into a long-life producer and offer flexibility in a volatile PGM market.

Northam called a snap media conference last week to announce the successful completion of its Booysendal feasibility study and to provide more details on the proposed development of Booysendal, which was in platinum major Impala’s acquisition sights prior to the global economic meltdown.

The tough economic times have resulted in a tweaking of the layout and design of the phased modular manner in which the Booysendal operation will be built.

Northam Platinum CEO Glyn Lewis tells Mining Weekly that final board approval for a modular, phased development of the large 103-million-ounce resource is expected in the first half of 2010.

Lewis provided greater insight into the geological, mining and metallurgical plans for Booysendal, which is situated north of the town of Lydenburg, on the eastern limb of the Bushveld Complex, in the north-eastern part of South Africa, where the most platinum development is taking place.

The large PGM asset lies south of the Steelpoort fault, where the upper group two (UG2) and Merensky PGM basket resembles that of the northern portion of the Bushveld’s western limb, where there is a close to two:one platinum:palladium ratio, with high grades of rhodium in the UG2.

The UG2 prill split is 58,6% platinum, 31,4% palladium, 9,2% rhodium and 0,8% gold.

Booysendal covers nearly half of the southern compartment’s 37-km-long strike length, abutting on Anglo Platinum’s large Der Brochen, along with the platinum operations of Two Rivers, Mototolo, Eastplats and Everest.

Of the surrounding properties, only Der Bochen’s size compares. Booysendal has 14,5 km of strike length that outcrops to surface, compared with Der Brochen’s 8,5 km strike length, which the Helena fault splits down the middle; Two Rivers’ 6-km strike length; Mototolo’s 4 km; and Everest’s 1 km.

Forty-one per cent of Booy-sendal is in the measured and indicated resource categories.

More than 130 Merensky boreholes and 170 UG2 boreholes have been drilled and 30 000 results assayed.

The first module and the north decline will be located 1,65 km from the northern boundary.

Planning allows immediate access to the Merensky reef and future planning includes the sinking of a vertical shaft to access the resources downdip and declines in the south.

The grade of the UG2 in this area averages 3,96 g/t over a channel thickness of 145 cm, making the UG2 conducive to mechanised mining.

Planned are two UG2 mines, each across 4 km of strike, and 2 km of dip – the north mine and the south mine.

The modular approach has been selected and the monthly tonnage to be milled by the first module is 120 000 t/m, and the second module, when built, will mirror the first and double the tonnage milled to 240 000 t/m.

The planned annual production from the first module is 130 000 oz/y, and the planned annual production from the second module is 115 000 oz/y, offering a total of 245 000 oz/y.

Studies show that Booysendal’s UG2 reef production offers the best internal rate of return and the 120 000-t/m output of the first module provides a 9% discount on a standalone basis, in a financial modelling exercise that excludes 35% of the capital redeemable from Northam’s cash flow.

The UG2 deposit will be mined by the room-and-pillar method, to keep costs down and to improve safety.

On the production plans, Mvelaphanda Resources (Mvela) executive manager:commercial James Wellsted comments to Mining Weekly: “There’s quite a fast build-up to 130 000oz/y in 2015 from the first decline. Electricity permitting, the second will start in 2013, and, by 2018, the second decline will be in full production.”

Northam black economic- empowerment partner and major shareholder Mvela intends using the proceeds of its planned unbundling exercise to cofund Booysendal.

The excess cash Mvela raises from the sale of its Gold Fields shares can be applied to Northam in a rights issue.

That will enable Northam to fund a second decline at Booysendal, depending on the bankable feasibility study and whether the project has sufficient power and water for another decline.

“Over the next eight years, there will thus be a potential 85% platinum production increase from Northam, which no other platinum producer of stature is currently showing,” Wellsted adds.

One analysts has expressed concern about the lack of public infrastructure north of Lydenburg, which will leave Northam to finance access roads, water pipelines and initial power for construction in 2010.

Moreover, module two will also cost another R3-billion, though public infrastructure is part of the first module’s cost, as the second module includes the cost of an overland conveyor.

A power allocation on an 11-kV power line will be installed for the construction phase and Eskom has completed a feasibility study for an 80-MVA substation at Booysendal. Water has also been secured.

New-order mining rights have been obtained over 11 farms and applications have been submitted for rights over the remaining two farms.

Zondereinde

Booysendal ends Northam’s long period with only one operation – the Zondereinde mine on the northern part of the Bushveld’s western limb – where the company has had to endure working in the deepest, the hottest and the most pothole-pocked platinum mine in the world.

Some R270-million in capital is being spent on Zondereinde in the financial year to June 30, 40% of the total on mine deepening. The level of capital expenditure currently under way is R60-million less than the R330-million spent in the 2009 financial year, which included R74-million for a smelter rebuild.

Accustomed to overcoming adversity, Northam has coped with the global meltdown and has managed to remain cash positive and to hold down costs to 14% in the 12 months to June 30.

RBC Capital Markets analyst Leon Esterhuizen says that Northam has outperformed its sector, but Lewis cautions that the strong rand is squeezing Zondereinde’s 25,7% operating profit margin, which will mean less cash generation.

Zondereinde, which produced 333 000 oz in the 12 months to June 30, is likely to benefit from mining higher-value Merensky reef in the future: “Going west, we will remain in the pothole facies for some time to come, but all indications are that, with the decline at the Northam mine, we will be mining normal Merensky reef, which is conformable, has a higher stoping width, and yields higher ounces per square metre,” Lewis adds.

As at June 30, the company had a R921-million cash balance before paying a dividend of 40c a share.

The irony of Northam is that it is about to be a miner of two extremes: the operator of the world’s deepest platinum mine, and the soon-to-be operator of the world’s shallowest platinum mine that outcrops invitingly on to surface.

“The Booysendal orebody itself is conformable and nothing like the potholed facies that we experience at Northam’s Zondereinde mine,” says Lewis.

Booysendal will diversify Northam’s income streams, increase production and reduce the company’s operational risk.

Booysendal has increased Northam’s resource base six-fold and, more significantly, adds shallow, lower-cost ounces, which will secure the listed company’s production base for years.

The growth that Booysendal is set to bring to Northam is expected to attract investor attention.

“In the last upcycle, the most aggressive production growth was coming from Aquarius Platinum, which tended to outperform the other platinum producers through that phase.

“But now, although Aquarius has some growth through its deal with Ridge Mining, all Aquarius’ other mines are nearing the end of their lives, so Aquarius no longer has the growth profile it once had.

“At the same time, Impala Platinum, Anglo Platinum and Lonmin Platinum have pulled back on their capital projects and, of the platinum companies in which it is feasible for the average investor to invest, Northam is going to be the one that will show the most growth by almost doubling its production in the next eight years,” says Wellsted.

While other platinum projects have been stalled by the global economic meltdown, Booysendal’s outcropping over 14,5 km provides the flexibility for the modular step-by-step approach.

“If there is significant economic improvement and Eskom does have capacity to supply more electricity, the third and fourth declines can then be brought into production quite fast,” Wellsted adds.

A highly regarded analyst who spoke to Mining Weekly on con-dition of anonymity said, how- ever, that Booysendal was coming in below his cost expectations.

Although Booysendal’s R410/t cost is half that of Northam’s Zondereinde mine, the analyst expected lower costs and greater volume.

“The costs also look like they are coming into the third quartile on the cost curve, and not the first quartile, as I was expecting,” he says.

Mvela deputy chairperson Bernard van Rooyen counters, however, that Booysendal has pool-and-share upside with the adjoining Der Brochen mine, because of Booysendal being able to access the Der Brochen area below the Helena fault more economically.

That will add to a resource that already gives it the longest life potential in the south-eastern Bushveld and an enviable shallow- ness.