Toronto-based
The assets are held through the company’s 73%-owned, Johannesburg-listed subsidiary,
MPM’s Messina Platinum project is divided into four phases representing major fault blocks, of which only phase 1 is in production. MPM holds licences for phases 1, 2 and 4, and is a 50-50 partner with the black empowerment group Mvelaphanda Resources for phase 3.
At the Phase 1 mine, which has been in operation since mid-2001, SouthernEra is deepening its Voorspoed shaft to 730 from 440 metres and is producing from the 150, 200, 275 and 350-metre levels. A decline ramp from the 350- to the 430-metre level is under construction.
During the third quarter, the Main shaft hoisted 142,381 tonnes of both development and ore material, from which were produced 14,000 oz. of three platinum group elements plus gold, as well as 146 tonnes nickel and 106 tonnes copper. Generally, the credits consist of platinum (44%), palladium (34%), ruthenium (9%), rhodium (6%), iridium (5%), gold (2%), nickel (0.22%), and copper (0.13%).
The average head grade for the quarter was 3.57 grams 3PGE per tonne, and SouthernEra expects this figure to improve as the mine approaches steady-state production of 120,000 tonnes per month in the first half of 2004.
At last count at the phase 1 area, the probable reserves, to a depth of 1 km, stood at 10 million tonnes of Merensky reef grading 4.78 grams 5PGE plus gold per tonne and 15.5 million tonnes of UG2 reef grading 5.13 grams 5PGE plus gold, for a total of 3.93 million contained ounces. The measured resources to the same depth boast similar tonnages and slightly higher grades.
The Phase 1 mine exploits both the Merensky and UG2 reefs in a ratio of approximately 60 to 40, respectively. Conventional long-hole stoping methods are used to mine the Merensky while the UG2 is mainly mined using sublevel open-stoping methods.
The two ore types are fed through the plant as a combined stream, something that is currently unique in the South African PGE industry, and recoveries during the recent quarter averaged 85.6%, in line with projections.
Concentrate is sent in slurry form across to the western limb of the Bushveld to Implats’ facilities near Rustenburg. The toll smelting arrangement, whose details are confidential, was part of the original sales agreement for Implats’ stake in Messina.
Implats markets the resulting metal and has an offtake agreement with a major auto manufacturer for 160,000 oz. of Phase 1 PGE production per year for a minimum of five years starting in 2002.
The agreement includes locked-in floor and ceiling metal prices. For platinum, there is a floor of US$400 per oz. and a ceiling of US$600 per oz. for 80% of the 160,000 oz. For palladium, 100% of the 160,000 oz. has a floor averaging US$370 per oz. and a ceiling of US$658 per oz.
MPM has been awarded a mining licence at the adjacent, 6.3 million-oz. Phase 2 project, and the MPM-Mvelaphanda JV has been awarded a prospecting permit for the 7.9-million-oz. Phase 3 project.
In support of a feasibility study of phases 2 and 4, due in the first half of 2004, a drilling campaign is under way. Twelve holes drilled to a depth of 500 metres have already been completed over a 6-km strike length. Results are pending.
Based on a 2002 scoping study of phases 2 and 3 by SRK Consulting, SouthernEra envisages a 240,000-tonne-per-month mine that will target a combined resource of 15.9 million oz. The mine would produce more than 340,000 oz. 5PGEs plus gold for at least 30 years.
Another drilling program, over the phase 4 area, is under way, with a prefeasibility study due late next year.
Meanwhile, at SouthernEra’s wholly owned Millennium Platinum project, also in the southeastern lobe of the Bushveld complex, drilling has outlined an indicated resource of 30.6 million tonnes grading 3.76 grams per tonne, equivalent to 3.7 million oz. 5PGEs plus gold.
On the financial front, Messina concluded a rights offering in mid-October. The company’s minority shareholders subscribed for an aggregate of 1 million shares, resulting in about US$8.5 million.
In mid-November, SouthernEra closed a C$77.1-million bought-deal equity financing with a syndicate led by RBC Capital Markets and BMO Nesbitt Burns. The financing consisted of 12 million units priced at C$6.40 apiece. A unit comprises one share and half a warrant, with a full warrant entitling the holder to buy another share for C$10 within five years.
The financing brings the number of issued and outstanding SouthernEra shares to 74.2 million, as of Nov. 26, for a market capitalization of $421 million. The company will use the money to repay debt and develop the Messina Platinum project.
SouthernEra’s senior debt comprises two rand-denominated tranches: the first tranche, of R270 million (US$38 million), bears interest at 14.51%, while the second, R75 million (US$10 million), has an interest rate that fluctuates with the average of a basket of long-term South African money market rates (15.5% at Sept. 30, 2003).
Just 25 km northwest of Messina, SouthernEra operates the Klipspringer diamond mine, of which it owns half. The remainder is held by
Production at the mine was hampered in the third quarter by a labour strike, which was settled in July with a new wage agreement and a commitment by the National Union of Mineworkers to support continuous operations.
Klipspringer’s throughput in the third quarter was 40,583 tonnes, while the average grade was 39.65 carats per 100 tonnes, yielding 16,082 carats.
In October, SouthernEra discovered a “substantial gold anomaly” at its 625-sq.-km Koumba property in Gabon, West Africa, 160 km southeast of the capital, Libreville. The gold mineralization appears to be associated with vertically dipping veins or stockworks.
The company, which has been exploring for PGEs, diamonds and gold in the country since 1999, is now drilling the property, and two of 20 planned holes have been completed so far.
Historically, the Koumba region has supported both alluvial and primary gold mining. Indeed, between 1935 and 1954, more than 1.5 tonnes gold were extracted.
In the third quarter, SouthernEra incurred a net loss of US$4.2 million (or C7 per share) on US$628,000 in diamond sales revenue, compared with a net loss of US$666,000 (C1 per share) on diamond revenue of US$887,000 in the corresponding period of 2002. In a big swing, cash flow provided by operations was $5.5 million (9 per share) in the quarter, up from a use of $3 million (6 per share) a year earlier.
For the first nine months of 2003, the company lost US$2.3 million (C7 per share) on US$2.3 million in diamond sales, compared to a loss of US$4.3 million (C1) on US$2.2 million is sales in the corresponding period last year.
The Messina and Klipspringer operations continue to be affected by the unusual strength of the South African rand, which appreciated a further 4.7% relative to the U.S. dollar during the recent quarter.
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