Platinum Group seeks offtake agreement with Eskom

CANADIAN firm Platinum Group Metals is working on an offtake agreement, which is one of the conditions required to finalise a $260m financing package to build a mining project for which Eskom has warned it cannot supply full power.

In its management discussion and analysis document issued in Canada on Tuesday, Platinum Group said Eskom told it last month that it was “unable to install” the infrastructure to deliver the 30 megavolt amperes (MVA) to the mine towards the end of next year, as scheduled.

The project immediately south of the Pilanesberg nature reserve already has a power supply of 1.5MVA. Power lines and a substation to deliver 10MVA are due for commissioning in the middle of this year. That is enough power for the early underground development and early operations up to 2015.

Platinum Group needs another 30MVA for full operations from 2016, for which Eskom was to have installed power infrastructure for 132 kilovolt amps (KVA).

“Eskom’s engineers and the company are evaluating alternatives to use an existing 88KVA regional infrastructure to provide the mine site with power as needed during the ramp up,” Platinum Group said.

The project will deliver 275,000oz of four platinum group metals — platinum, palladium, rhodium and gold — at steady state. The project will initially focus on the Merensky Reef, one of two that provide the bulk of SA’s platinum and palladium output.

It is a highly desirable reef for an offtake partner because it has very low levels of chrome, a problematic mineral for platinum smelters.

Anglo American Platinum subsidiary Rustenburg Platinum Mines has given notice that it was exercising its first right of refusal for an offtake agreement.

Maseve Investments, which is 74% owned by Platinum Group and 26% by Wesizwe Platinum, is drafting legal agreements for offtake. This is one of the conditions needed to finalise a $260m funding agreement with a consortium of banks, including Absa Capital and Standard Bank SA.

Other conditions for finalising the loan include an “agreed metals hedging programme”.

The project is broken into two phases and the second phase, includes the building of a mill, concentrator and tailings facilities.

The first phase has already intercepted the Merensky Reef, which is now being stockpiled on surface.

The $100m first phase is about 12 weeks behind schedule because of a 20-day safety stoppage and a “suboptimal performance” by a civil works contractor, it said.