Canada’s Platinum Group Metals (TSX: PTM; NYSE-AM: PLG) is working with Saudi Arabia and a local partner to build a smelter and refinery in Riyadh.
But they are to be fed from the nearly $1 billion capex South African Waterberg mine that hasn’t been built yet and would need to overcome that country’s trade restrictions on unrefined precious metal exports. That’s a major obstacle, according to BMO Capital Markets mining analyst Raj Ray.
“In order for the Waterberg concentrate to be processed in Saudi Arabia, a long-term export approval to ship concentrate from South Africa is required,” he wrote in a note to clients on Wednesday. “It is all conditional on the South African government granting the export permit.”
The partnership with Ajlan & Bros, an investment holding company with more than $15 billion in assets under management, includes a $4 million feasibility study split 50:50. There’s an option to form a joint venture to secure concentrate offtake from Platinum Group’s Waterberg PGM project.
The project’s September feasibility study estimates a 54-year mine life, with steady combined production of platinum, palladium, rhodium and gold (4E) of 353,208 oz. per year, peaking at 432,950 ounces.
The company said it’s still negotiating with South African authorities. PGM wants to explore local beneficiation options and secure export permits.
“Resolving the export approval issue is essential to realizing the full potential of Waterberg,” Platinum Group’s CEO, Frank Hallam, said in a September news release.
While the goal is to export the ore, there is a potential local opportunity. South African PGM smelters may seek Waterberg’s sulphide-rich concentrates to optimize furnace recoveries. They face depleted reserves from other PGM mines on the platinum-rich Merensky Reef and an increased reliance on Upper Group 2 ore, which contains chromite and aluminum silicate minerals and fewer base metals, according to the company.
Waterberg, in the Bushveld Igneous Complex, has one of the country’s largest untapped PGM resources. It has proven and probable reserves of 246.2 million tonnes at 2.96 grams 4E per tonne for 23.4 million oz. of metal.
The capital cost totals $946 million, with $776 million needed during the peak stage. After-tax cash flow over the mine’s life could reach $6.5 billion, with on-site cash costs of $658 per oz. and all-in sustaining costs of $761 per ounce.
Ajlan & Bros, which first partnered with Platinum Group in December last year for the refinery project, plans to complete a definitive feasibility study for the smelter. No timeline for its completion has been given.
A market study has already found that recycling PGM-bearing materials, like automotive and petrochemical catalysts from the Gulf region, could diversify feedstock and reduce reliance on Waterberg concentrate. Saudi Arabia’s Ministry of Investment (MISA) pledged to help with strategic guidance and financial evaluations.
The project aims to support Saudi Arabia’s Vision 2030 strategy to expand mining and industry. The strategy includes the Global Supply Chain Resilience Initiative, under which this project falls. It aims to strengthen supply chains, attract export-focused investments, and support economic diversification.
Shares in Platinum Group Metals closed flat at C$2.25 apiece on Wednesday. They have ranged between C$1.30 and C$3.13 over the past 12 months, and it has a market capitalization of C$253.9 million.
