Bakubung Platinum Mine Optimisation Study
14 March 2014
The Wesizwe Board of Directors (“Board”) is pleased to announce that the Bakubung Platinum Mine (“BPM”) Optimisation study (“Optimisation Study”) was approved by the Board on 12 March 2014.
Wesizwe originally updated and concluded a definitive Bankable Feasibility Study (“BFS”) in October 2009. This Optimisation Study underpins the current mine development of the BPM project (“the Project”) currently underway. Given that the mine development is currently in its shaft sinking phase, an opportunity arose to undertake the Optimisation Study, without negatively effecting the development of the mine. The Optimisation Study was undertaken to significantly improve the business case of the mine given the following key environmental factors:
- Lower metal prices;
- Increasing cost pressures on the industry;
- Changing social climate and working conditions requirements;
- Technical challenges currently facing other mines in the industry such as:
- Face availability
- Logistical challenges underground
- Work cycles and workshop facilities
Key objectives of the Optimisation Study were specifically to:
- Reduce the timeframe to full production;
- Reduce the nominal capital cost of the Project;
- Improve efficiency and flexibility;
- Minimize the operating costs; and
- Reduce business risk.
The key results delivered by of the Optimisation Study include:
- A 26 month reduction in time to full production. The initial 230ktpm production level is now planned for October 2020, as opposed to December 2022;
- An 8.7% increase in mine capacity to 250 ktpm of run-of-mine ore at full capacity;
- A steady state monthly production to increase to 35 280 oz 4E/month or 420 000 oz 4E/annum, a 20% increase in the annual production rate;
- The average mining employees in service (steady state) is expected to be reduced by 235 people to 3135;
- All mining will be fully or semi-mechanised;
- The shortening of shafts, accommodated by the removal of underground crushing and bringing level development onto reef horizons (on reef development), resulting in a substantial reduction in off-reef development (a reduction of around 402 000m3 of off-reef development);
- The substantial use of conveyor belts (ore transport) and chair lifts (people transport);
- The inclusion of a third (6m)raise-bore shaft to further assist in ventilation and logistics (men and material);
- The increase in hoisting capacity, to support the increased production rates;
- The removal of underground infrastructure to surface (including primary crushing); and
- The revision of the shaft pillar strategy (to be mined at end of mine life).
The financial effects of the Optimisation Study are summarised as follows:
- The control budget estimate of nominal capital expenditure is expected to reduce to R10.69Bn from R12.03Bn, primarily due to the significantly improved ramp up timeframe to full production. Real capital cost has seen a 9% increase, largely due to the cost of capital equipment designed to reduce operating costs over the life of mine (including conveyor belts and chair-lifts);
- The net change in Project net present value (“NPV”) is a positive R2.1Bn to R6.5Bn. The major contributor to the increased NPV is the shorter timeframe to full production and a lower nominal capital cost. The improvement in NPV was however mitigated by increased operating costs and pre-production costs.
- Substantial savings (R1.1Bn) to be derived from significantly lower off-reef development; and
- An increase in expected operating costs over initial estimates in the original BFS have been factored in primarily due to increased labour and power costs.
PROJECT RISK MITIGATION FACTORS
Wesizwe remains focused on continued mitigation of Project risk and significant de-risking of the Project has been achieved through:
- Progress made to date – 17% of Project completed to date. Primary focus is on shaft sinking. The Main and Ventilation shafts have achieved depths of 396m and 567m respectively;
- Securing and subsequent drawdown of the US$650m Project Financing, as announced on the 13st December 2013; and
- Continued refinement of the Operating Team to ensure effective delivery against target.
The other key risks being monitored on a regular basis by Wesizwe and for which mitigation strategies are continuously updated and provided for are:
- Bulk Services: Power and Water – both remain on plan to date;
- Construction and Sinking Contractor performance;
- Mine head grade (anticipated); and
- Key skills and mine staffing - key factors in the Wesizwe project readiness planning processes.
Following the approval of the optimisation study, Mr Paul Smith, Chief Operating Officer of Wesizwe, said:
“We are pleased with the outcome of a very detailed optimisation study that saw over 16 000 man hours of dedicated work and almost 12 months to complete. We wish to thank the diversity and calibre of skilled professionals who contributed to this successful study. The study has delivered a quantum increase in our confidence in the mine development plan and the return the project is expected to deliver to shareholders over time. A special thanks to the small but hugely effective Bakubung Project and Mine management team who really drove this very successful study.”
The following competent persons approved the findings of the Optimisation Study insofar it relates to the:
1.) Mineral resource:
The Mineral Resource inputs to the Mineral Reserve estimates are the responsibility of Stewart Nupen and the modifying factors used in the Mineral Resource to Mineral Reserve conversion are the responsibility of Jonathan Buckley.
Mr. Stewart Robert Quentin Nupen, BSc. (Hons), GDE, MBA, FGSSA, Pr. Sci. Nat
8 Devondale Place, Hurlingham Manor, 2196
South African Council for Natural Scientific Professionals (400174/07)
Mr. Nupen has 7 years’ experience in the evaluation of Mineral Resources on the Bushveld Complex, as well as related mining and evaluation experience on narrow tabular (Wits-type) gold deposits.
Mr. Jonathan Anthony Buckley BEng (Mining), MSc (Eng), ACSM, MDP(USB), CPIR, MSAIMM, Pr.Eng
383 Paarl Close
Engineering Council of SA (20090049)
Mr. Buckley has 30 years of professional experience, including extensive operational and Mineral Reserve-related experience on the Bushveld Complex.
2.) Mineral reserve:
Mr Johann Christian Lamprecht (HND Economic Geology), SACNASP membership number 400019/07. Mr Lamprecht is a qualified competent person for the purposes of the SAMREC Code.
3.) Mine Design and mine plan:
Mr Noel E Williams (B. tech. degree from the University of Johannesburg and a Mine Managers certificate of competency) 44 years’ experience in underground mining of which 32 years was in senior management positions. Altogether Mr. Williams has 20 years of platinum mining experience and served for 10 years as a General Manager of large platinum mines. He has extensive experience in strategic planning and mine design. He also served in the position as head of mining for a major platinum mining house.
4.) Bakubung Platinum mine BFS Financial model update:
The updated Wesizwe financial model was prepared by Michael Sean Golding.
Mr. Michael Sean Golding, B. Com, B. Acc, CA (SA), MBL
Member of the South African Institute of Chartered Accountants (00153738)
81 Epsom Chase, Saddlebrook Estate, 100 Rose Road, Bridle Park AH, 1682
Michael has 21 years’ experience in corporate and project finance, the majority of which has been spent in the evaluation of metals and mining operations and projects in various geographic locations.
For more information contact:
Chief Operating Officer
Wesizwe Platinum Limited
Telephone: +2711 994 4600
Mr Hamlet Morule
Executive: Corporate Affairs and Investor Relations
Wesizwe Platinum Limited
Telephone: +2711 994 4600
For a more comprehensive copy of the Optimisation Study presentation that will be made to investors, shareholders are referred to the company’s web site (www.Wesizwe.com).