Anooraq lines up BEE PGM partner

Not waiting for South African legislation aimed at a more inclusive mining industry to be chiselled in stone, Anooraq Resources (ARQ-V) has lined up a black economic empowerment (BEE) partner.

In return for 91.2 million shares plus around $1.7 million in cash, Vancouver-based Anooraq plans to pick up Pelawan’s rights to a 50% participation interest in the Ga-Phasha platinum group metals project on the Eastern Limb of the Bushveld complex.

Under the deal, about 89 million of the shares would be held in escrow for six years, or until a year after production at Ga-Phasha. Pelawan will also be required to maintain at least a 52% stake in the company to ensure its qualification as a BEE company. The BEE partner would be allowed to sell up to $10 million worth of Anooraq shares during the year after closing.

To compensate for dilution after any financing Anooraq would also have to issue additional shares to Pelawan to maintain its 52% interest. At the end of the yearlong period any shares held by Pelawan in excess of its 52% stake would be returned to Anooraq for cancellation.

The deal is expected to close on April 22, subject to shareholder and regulatory approval in both South Africa and Canada. The deal is also subject to Pelawan finalizing its deal to pick up its half-interest in Ga-Phasha from Anglo Platinum.

Ga-Phasha is situated on the northern part of the Eastern Limb of the Bushveld complex. The 97-sq.-km property comprises four farms – Paschaskraal, Klipfontein, De Kamp and Avoca – adjacent to Anglo Platinum’s Twickenham-Hackney PGM property, where a feasibility study has been approved and site infrastructure is being developed.

The project plays host to both the UG2 and Merensky Reefs, the Bushveld’s main PGM-bearing horizons. Measured and indicated resources in the UG2 reef on the Paschaskraal and Klipfontein farms are pegged at 65.7 million tonnes running 7 grams combined platinum, palladium, rhodium and gold (PGM). Another 137.4 million tonnes of inferred material on all four farms grades 4.3 grams gold. The estimate employs a cutoff grade of 5 grams PGM per tonne. The reef averages 0.74 metre in width.

Based on a cutoff of 3.5 grams PGM, the Merensky Reef is estimated to contain 43.3 million tonnes of measured and indicated resources grading 4.4 grams PGM on Paschaskraal and Klipfontein. Inferred resources total 111.5 million tonnes running 7.1 grams PGM. The Merensky reef averages 1.19 metres in width.

The estimates were prepared following Canadian Institute of Mining, Metallurgy and Petroleum (CIM) 2000 guidelines and are based on 81 drill holes.

The latest deal follows one inked by Anglo and Anooraq late last that will see the pair join forces in the hunt for platinum group elements, gold and nickel on Anooraq’s Drenthe farm and the northern portion of Anglo Platinum’s Overysel farm on the northern limb of the Bushveld (T.N.M., Dec. 8-14/03).

A recent preliminary economic assessment of Drenthe by Perth, Australia-based RSG Global concludes that Drenthe is capable of supporting a robust open-pit mine with a life-of-mine strip ratio of 3.5. Recovery rates from surrounding operations were used since the company has not yet completed any metallurgical test work.

The study envisages cash flow, before taxes, royalties and interest, of US$435 million over its 17-year lifespan. The project net present value is pegged at US$144 million based on a 10% discount. The price tag for mine construction is estimated at US$58 million, excluding further exploration and feasibility costs. At an internal rate of return of 39% payback would come in just under three years.

The assessment is based on inferred resources totalling 99.4 million tonnes grading 0.6 gram Platinum, 0.63 gram palladium, 0.012 gram rhodium and 0.06 gram gold per tonne, plus 0.16% nickel and 0.1% copper, based on a cutoff grade of 0.5 gram PGM plus gold.

Assumed metal prices were US$650 per oz. of platinum, US$180 per oz. of palladium, US$600 per oz. of rhodium, US$340 per oz. of gold, US$3.60 per lb. of nickel and US77 per lb of copper. An exchange rate of 8 rand per US$1 was also applied.

The joint venture plans a major multi-rig infill drilling program on Drenthe plus delineation drilling on the southern extent of the deposit onto the northern portion of the Overysel farm. An updated resource estimate will follow.

The Drenthe deposit is situated about 80 km to the west of Anglo Platinum’s recently completed PGM smelter at Polokwane.

News of the deal with Pelawan sent shares in Anooraq soaring $1.48, or 55%, to $4.18 once they resumed trading in Vancouver in the late afternoon on Jan. 22.