Nothing if not creative in its diversification plans,
The first deal sees SouthernEra buy Impala Platinum’s 54% stake in Johannesburg-listed Messina Limited, owner of two mineral leases at Voorspoed and Doornvlei, about 15 km southeast of SouthernEra’s Klipspringer diamond mine. The acquisition will cost SouthernEra R67 million ($16.3 million), and SouthernEra is obliged to provide a bankable feasibility study within four months of closing. Another condition of the sale is that Implats and SouthernEra come to a smelting and refining agreement for concentrate from Messina.
The two properties cover 54 sq. km on the northeastern margin of the Bushveld intrusive complex, the principal host of platinum-group mines in South Africa. Reserves at Voorspoed stand at 24 million tonnes grading 6.3 grams of platinum-group elements per tonne; at Doornvlei, there is a reserve of 27 million tonnes grading 6.5 grams combined PGEs.
Two of the Bushveld’s known platinum strata — the Merensky and UG2 reefs — carry the mineralization at Messina, but their moderate dip (averaging 58) made them awkward to mine by open stoping and impossible to mine by longwalling (the usual method in other Bushveld mines, where the reefs are nearly horizontal). The difficult mining, in comparison with Implats’ other mines, was among the factors that led Implats to mothball the project in 1992, after acquiring it in 1989 for R216 million (about $99 million at the time).
SouthernEra expects to solve the problem using overhand shrinkage, which has proved useful in exploiting similar moderately dipping structures at Klipspringer. SouthernEra’s prefeasibility studies indicate an operating cost around US$19 per tonne, based on hoisting 60,000 tonnes and producing 1,500 tonnes of concentrate monthly.
Recoveries of platinoids and gold in concentrate have been around 88%, and byproduct nickel and copper are also recovered. SouthernEra’s prefeasibility calculations of net smelter return show total revenue of US$38 million, based on a net-back around 76% for platinum, palladium, rhodium, gold, nickel and copper.
Capital costs are estimated at R257 million ($62.5 million), and the prefeasibility study indicates an internal rate of return around 30%. Among Messina’s other assets are R58 million ($14.1 million) in cash and R109 million ($26.5 million) in tax losses, which can be carried forward and applied against earnings. The operation is subject to a 6% net profits interest held by a trust.
SouthernEra has no definite plans to make an offer for the minority interest in Messina, as the company may provide a useful listed platform for public financing in South Africa. Post-apartheid programs of black empowerment may also be easier with a listed South African company in which black investment funds could buy shares.
Meanwhile, the company has inked a deal with
Crystallex has committed US$500,000 for drilling on properties that SouthernEra either holds or has applied for. The work will earn Crystallex a 50% interest in the joint venture, and, if there is ever any production, SouthernEra will market the diamonds.
Crystallex says SouthernEra had discovered several kimberlite bodies by following up on indicator mineral trains located in stream-sediment surveys. Airborne magnetic and electromagnetic surveys of the SouthernEra properties provided several more targets, and the new partners are awaiting Uruguayan government approval of SouthernEra’s applications before a drill program starts.
SouthernEra has also completed its purchase of a 51% interest in the Camafuca diamond project in Angola from Sphere Trading Group of South Africa. The company is getting the controlling interest in the project for US$3.25 million in cash and 880,750 SouthernEra shares.
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