Positive prefeasibility on Platinum Group Metals’ Western Bushveld JV (February 05, 2007)

Vancouver — With a positive prefeasibility study in hand for its Western Bushveld joint venture in South Africa, partners Platinum Group Metals (PTM-T, PTMQF-O), Anglo Platinum (AGPPY-O, ANP-L, ANANP-J) and local Black Economic Empowerment (BEE) company Africa Wide Mineral Prospecting & Exploration like the economic outlook of the proposed underground platinum mine and have approved advancing the project to the bankable feasibility stage.

The study reviews a modelled underground operation in the Project 1 area of the joint venture, with anticipated annual platinum output of 155,000 oz. (total of 250,000 oz. per year combined platinum, palladium, rhodium and gold) over a more than 18-year mine life.

Two types of underground access will be reviewed in the final feasibility: a vertical access shaft and an early access decline-vertical shaft combination.

Running the numbers on a vertical access shaft scenario gives a 17.7% pretax internal rate of return (IRR) and a US$339-million net present value (NPV), while the decline-shaft combination delivers an estimated IRR of 17% and US$325-million NPV, both assuming average industry long-term metal price estimates (US$900 per oz. platinum, US$330 per oz. palladium, US$2,000 per oz. rhodium and US$500 per oz. gold) and a 5% discount rate.

When recent spot prices for the metals (US$1,204 per oz. platinum, US$322 per oz. palladium, US$4,800 per oz. rhodium and US$627 per oz. gold) are used, project economics are significantly enhanced, with internal rates of return of 28.9% and 29%, and net present values of US$884 million and US$881 million forecast for the two access methods, respectively.

Total capital spending (including sustaining costs) for the vertical access shaft option is estimated at US$328 million, while the decline-shaft combination would cost about US$355 million.

“The project is attractive because of its platinum grade and shallow depth,” said John Gould, managing director of Platinum Group Metals South Africa.

Platinum group metal (PGM) resources on the Western Bushveld JV are primarily hosted in three distinct units. In the Merensky Reef, mineralization occurs both in a pegmatoidal feldspathic pyroxenite unit and in the contact reef. PGMs also occur in the Upper Group No. 2 (UG2) chromitite seam.

Total measured resources of 4.45 million tonnes grading 5.2 grams of combined platinum, palladium, rhodium plus gold (4Es) were reviewed in the study. An additional 40.9 million tonnes of indicated resources was also tabled, averaging 4.3 grams of the combined 4E.

Prefeasibility results provide the joint-venture partners with the comfort to continue drilling along strike on the Merensky Reef and UG2 structures, in its Project areas 2 and 3.

Project operator Platinum Group Metals and Anglo Platinum each hold a 37% interest in the joint venture with Africa Wide Mineral holding the remainder. Africa Wide’s 26% interest satisfies South Africa’s 10-year targeted BEE ownership levels under the country’s new Mining Charter and Mineral Resources and Petroleum Development Act.

The project covers about 67 sq. km in the platinum-rich western limb of the Bushveld complex, host to a majority of the world’s PGM production. It adjoins Anglo Platinum’s Bafokeng Rasimone mine with refined platinum output of about 200,000 oz. per year and its Styldrift project.

Shares of Platinum Group Metals have recently rallied to a new high of $2.50 apiece on the positive prefeasibility report, giving the prospective producer a market capitalization of about $140 million based on its 56.5 million shares outstanding.