Eastplats Plots Bigger, Better Smelter for Crocodile River

Vancouver — As part of a refurbishment plan, Eastern Platinum (ELR-T, ELR-L) is looking to upgrade platinum group metal (PGM) smelting capacity at its subsidiary’s Crocodile River mining complex in South Africa’s Bushveld complex.

The upgrade plan would see the smelter complex producing up to 600,000 oz. of PGMs in matte per year.

A previous study on the existing smelting equipment indicated it was in good condition and evaluated three options to re-establish operations — two of which Eastplats is considering.

One of the options recommends an upgrade to a 20-megawatt capacity at the complex by first refurbishing the two existing 3.7-megawatt furnaces and then commissioning an additional 14 megawatts.

The other reviewed phasing in a 20-megawatt operation by first installing a new 14-megawatt furnace, and then bringing the refurbished furnaces online for the additional 7.4 megawatts.

Costs for both plans were estimated at about $70 million, with an anticipated ramp-up period to production of 250,000-300,000 oz. PGMs per year over two years, reaching 500,000-600,000 oz. PGMs annually over 3-4 years.

Eastplats, optimistic on the PGM price outlook and demand for additional smelting capacity, plans to commission an updated analysis of the proposals.

South Africa only has three large PGM smelting facilities and one smaller operation, prompting concerns of a bottleneck in smelter and refining capacity.

The Crocodile River mine was established in 1987 but cycled in and out of operation due to metal prices fluctuations, currency swings and mine cost over-runs. It was placed back into production in 2004 and underwent extensive underground development and refurbishment of surface facilities.

The operation consists of four mining blocks with access by declines and shafts. As of late 2005, measured and indicated resources stood at nearly 26.8 million tonnes grading 2.74 grams platinum per tonne, 1.2 grams palladium per tonne, 0.45 gram rhodium per tonne and 0.03 gram gold per tonne.

In mid-2006, Eastplats completed its acquisition of three private companies that collectively held a 69% interest in the South African PGM producer Barplats Investments (BPL-J). Barplats’ principal mining operation is its 100,000-oz.-per-year Crocodile River PGM complex in the western Bushveld. It also holds the Kennedy’s Vale project in the Bushveld’s eastern limb, adjacent to Eastplats’ Spitzkop PGM project.

Eastplats issued about 288.6 million shares plus $27.7 million in cash for the acquisition and satisfied a financing requirement by successfully closing a $150-million brokered private placement.

Additionally, Eastplats recently closed a brokered $201.25-million financing (105.9 million shares at $1.90 apiece) earmarked to fund development of its Spitzkop project and for the smelter evaluation and refurbishment plans at Crocodile River.

The company also recently received approval from the minority shareholders of Barplats to acquire those shares and bring its interest to 74%. Its Black Economic Empowerment partner, Gubevu Consortium Holdings, will hold its requisite 26% interest with Barplats becoming a private company and delisting from the Johannesburg Stock Exchange. Eastplats has received approval for a secondary listing on that exchange.

In its latest third quarter, Eastplats reported an $11.2-million loss on revenue of $35.5 million. The producer posted PGM production of 26,807 oz. during the third quarter, up slightly from 25,873 oz. in the previous quarter.

With 646.4 million shares outstanding, the company posts a $1.6-billion market capitalization based on its recent $2.50-per-share trading level.