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SOUTHERN Palladium on Tuesday forecast a more than doubling in the value of its Bengwenyama platinum group metals project, saying improved prospects for metal prices and better recoveries drove the upgrade.
Disclosing the results of an updated prefeasibility study, the minerals exploration and development firm, one of the few on the JSE’s screen, said the project’s post-tax net present value increased to $1.96bn from $857m. It bases its assessment on an 8% discount rate, arguably a tad favourable for a greenfields South African project.
The market liked the announcement, taking shares in Southern Palladium, which is also listed in Australia, up just over 10% in early morning trade. The share is 73% higher year-to-date.
Southern Palladium, whose Bengwenyama project is situated on the Eastern Limb of the Bushveld Igneous Complex, once considered a name change when the palladium price troughed, but the PGM upcycle is giving the firm a new lustre.
The key factors behind the value upgrade are higher chrome recoveries – increasing to 85.6% from 30% in the earlier study – and a long-term platinum price forecast 45% higher at $1,738 per ounce. The metal price forecasts run over Bengwenyama’s 33-year life of mine.
The realised PGM basket price is now expected to be $2,210/oz over the life of mine, up 57% on the previous assessment. Bengwenyama will be developed in two phases: the first producing 200,000 oz of PGMs a year, increasing to 420,000 oz a year in the second.
The basket includes gold, for which Southern Palladium forecasts a 79% higher price of some $3,500/oz. The price assumptions also model a stronger rand, a factor that increases the peak funding requirement by $50m to $329m.
Roger Baxter, executive chairman of Southern Palladium, said Bengwenyama had been transformed, saying it was “... no longer simply a PGM project with chrome credits, but a PGM-chrome co-product operation”.
Higher chrome output – flagged by the company in April – is key to the new study, with chrome credits lowering all-in sustaining costs by dint of process tweaks. Ore will be ground more coarsely than previously, which allows for better chrome recoveries. Separate circuits for chrome and PGMs mean Bengwenyama’s PGM recoveries are unaffected.
All in all, steady-state chrome concentrate production increases to about a million tons a year from 350,000 tons in the previous study. First-stage chrome production will be 450,000 tons a year, while life-of-mine chrome output increases to 17.2 million tons from six million tons previously.
Southern Palladium said the higher-grade concentrate positioned it to advance talks on an offtake agreement with a smelting and refining partner. It will have competition as Northam Platinum and Impala Platinum-backed project Waterberg Joint Venture, controlled by Toronto’s Platinum Group Metals, is also seeking offtake deals.