JOHANNESBURG (miningweekly.com) – People are sitting up and taking notice of South Africa being very much back on the investment radar screen, Southern Palladium executive chairperson Roger Baxter said on Thursday.

This follows the return of Baxter and Southern Palladium MD Johan Odendaal from a North American road show where they attended the JSE’s South Africa Tomorrow Investment Conference in New York.

“We had a series of meetings in New York and then in Toronto and what's important is that people are sitting up and taking notice of the fact that South Africa is very much back on the investment radar screen, and that's because the Government of National Unity are implementing the reforms that have been agreed over the last couple of years.

“Not having loadshedding for seven months makes it a lot easier to sell South Africa, but also the fact is that we've seen a stabilisation in Transnet’s performance, we've seen business and government working well together to resolve particular issues and, as the Reserve Bank Governor Lesetja Kganyago said, just solving the electricity crisis adds about two percentage points back onto the growth rate.

“So, over the next couple of years, South Africa should be growing at 3.5%, instead of growing at 1.2%. We’ve got more work to do as a country but that's a positive message coming back from our meetings,”  Baxter told Mining Weekly. (Also watch attached Creamer Media video.)

Meanwhile, the Sydney- and Johannesburg-listed platinum group metals (PGMs) development company Southern Palladium is upbeat about the completion of its very positive prefeasibility study (PFS) on the Bengwenyama PGM project, which is located on the eastern limb of South Africa’s well-endowed Bushveld Complex, which Baxter describes as prime PGM mining real estate.

Speaking from Perth, the former Minerals Council South Africa CEO said: “I'm very glad to be involved in this project. I wanted to come back and really give something back to South Africa and to the industry, and I think this project is it.”

Of the $19-million that Southern Palladium raised on the ASX in June 2022, just under $15-million has been spent on exploration, which has proved up a 40-million-ounce resource and a six-million-ounce reserve in the 70%-owned Bengwenyama project, which accesses the orebody at a shallow level of 50 m.

“It's close to surface, it's low cost, it's Tier 1, and we've got a fantastic community who are fully supportive of the project, and we're working well together towards bringing this whole project to fruition.

“It's been interesting being out there in the investment marketplace not only marketing the project, but also looking at what people are thinking about South Africa.

“We have fantastic support of our Bengwenyama community partners, and they have a big equity stake in the business.

“We've got a very experienced management team, excellent board of directors, and we’re focused on making sure that this is going to be a flagship project development, demonstrating that South Africa is investable in the mining space and bringing on stream a world-class mining operation.

“We're looking at a 2.4-million-tonne-a-year production profile, 400 000 oz of PGMS, that's 6E PGMs, of which we're going to be producing about 150 000 oz/y of platinum, which, in perspective, is just over a third of Zimbabwe's entire platinum production, just using it as a country level example.

“So, it'll certainly be creating a lot of value. It has about a billion US dollar post-tax NPV, which is nicely scalable to higher prices, with a nice 28% internal rate of return criterion, which escalates with higher prices. It is very much in the lowest-cost quartile, with an all-in sustaining cost of $800/oz.

“We certainly think this is a great opportunity. We're working hard with our partners to bring it to fruition, and we're looking forward to being able to report back our progress as we go forward,” Baxter enthused.

The project was drilled out within two years and is targeting upper group two (UG2) reef. Mining from hanging wall into footwall will sidestep dilution, deliver grades of around 6.1 g/t into the plant, and place the project at the bottom of the cost curve, Odendaal outlined.

The mining of the UG2 reef brings with it the benefit of shallowness, high rhodium content and also chrome, the latter adding about 12% to the revenue stream, with platinum, palladium and rhodium contributing in relative equal proportion.

The UG2 reef basket price is around $1 450/oz, compared with the Merensky reef basket price at a lower $1 200/oz.

“So, it makes sense for us to target UG2 for now and also in future, not to say that we won't mine the Merensky. The Merensky reef is there and it's a nice wide package, and certainly something for the future. But for now, our focus is on the UG2,” Odendaal outlined.

UG2 reef life-of-mine (LoM) alone is 29 years and overall LoM earnings before interest, taxes, depreciation and amortisation $5.6-billion. Capital payback is 3.5 years from first concentrate production and the initial capital expenditure of R385-million, an estimate principally compiled for the two declines, processing plant, process plant infrastructure and covering construction and associated expenditure required for the 2.4-million-tonne-a-year production capacity.

The 5 280 ha project area in the Greater Tubatse and Sekhukhune district municipalities, in Limpopo, has the Marula and Modikwa PGM mines to the north and the Two Rivers, Mototolo and Booysendal PGM mines to the south.

“Eskom electricity reticulation is right there. There's a Transnet railway network that runs into the Steelpoort area. You've got the De Hoop dam, which was mostly funded by the mining companies to provide water into the operations. You've got a tremendous skills base in the area.

“Then, to add a second context to it, which is from a South African perspective, we also have a very well-established refining and smelting industry that's mostly obviously on the western limb of the Bushveld Complex and there's a well-established precedent where companies sell product either through toll refining or as a concentrate into the smelting refining that takes place on the western limb, and that's quite a big advantage that South Africa has versus some of the other PGM mining countries, or aspirant mining companies, countries where they don't yet have that level of smelting refinery-related infrastructure, which we have, obviously in abundance in South Africa,” Baxter pointed out.

Power will be supplied through 132 kV overhead lines connected to the national grid. A line running 3.5 km away is fed by the Merensky and Mampuru transmission and distribution substations.

Synchronised back-up generators will feed into the Bengwenyama distribution substations, with the total estimated 64.6 MW installed power having a power draw of 43.4 MW.

A study has been completed to assess potential carbon emission reduction strategies as well as alternative energy solutions for the project, including solar design.

Process water will be sourced from the local Lebalelo authority supplying water to local communities, neighbouring mining operations, and agricultural activities in the area.

Early indications are that the project’s peak total water requirement will be about 294 711 m³ a month.

Feasibility study work is due to begin in early 2025 in parallel with project construction funding discussions with financiers leading to the financial investment decision (FID).

Debt financing alternatives have already progressed with the appointment of Blackbird Partners.

Feasibility critical path study work includes metallurgical and geotechnical assessments.

Key value drivers during 2025 are the granting of the mining right, concentrate offtake outcomes and completion of a definitive feasibility study.

“We’re anticipating a lot of that process would be finalised by the end of 2025 and so I think we are anticipating that sometime in the first half of 2026 is when we would have reached that decision around FID.

“We do have in place debt advisers. We're in the process of looking at appointing equity advisers. We have met with the financial community, both customers, export credit agencies, DFIs, banks, et cetera, and there is a lot of interest and a lot of different options that are on the table for us to explore. Those will all be ultimately finalised in that FID, in our view, early 2026,” Baxter envisaged.

“Overall, supply-and-demand fundamentals look favourable for price support going forward. By the time we come into production, I think we can expect stronger prices. Of course, as a producer or as an operator you are, to a large extent, a price taker, and that's why it's so important that we are at that lower end of a cost quartile,” said Odendaal.

A few years back, there was expectation that demand for platinum in internal combustion engines (ICE) for vehicles would fall very significantly but growth of battery electric vehicles has since plateaued owing to charging anxiety and end-of-warranty resale value concern.

This has given rise to demand growth for fuel-efficient hybrid vehicles that continue to require palladium and platinum, which has gone into deficit, with supply at about 7.1-million ounces, and total demand of 8.1-million ounces, causing roughly a million ounces to be taken out of above-ground stocks.

Over the next three to four years, Baxter expects a platinum deficit of 700 000 oz/y to 800 000 oz/y to materialise, “basically meaning that the above-ground stocks would have been whittled away by 2026, 2027”.

“We think that the fundamentals are pointing nicely to the fact that we've been through the bottom of the market.

“In the last couple of days we've seen dollar strength and commodity prices coming off a little bit. But in general, we think that we've been at, that we're at, the bottom of the market. And we're hoping that by 2028 you know, things will certainly have continued to be on an upward trajectory. This is a cyclical industry, and it does work in cycles,” Baxter added.