| Mon 31 Mar 2008, 7:36 | | WEZ - Wesizwe Platinum Limited - Completion of bankable feasibility study and |
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WEZ
WEZ
WEZ - Wesizwe Platinum Limited - Completion of bankable feasibility study and
capital construction go-ahead
Wesizwe Platinum Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/020161/06)
JSE code: WEZ ISIN: ZAE000075859
COMPLETION OF BANKABLE FEASIBILITY STUDY AND CAPITAL CONSTRUCTION GO-AHEAD
Highlights
* Construction given the go-ahead on the back of positive Bankable
Feasibility Study (BFS) confirming commercial viability of the
Frischgewaagd-Ledig Complex
* Results show a base case with a Net Present Value of R9,5 billion at a
real discount rate of 5% and an Internal Rate of Return at 18 % with an
anticipated Life of Mine of 35 years
* Capital cost estimates of R5,6 billion
* 58 month construction programme commencing in the third quarter of 2008
* Construction funding will be arranged by a consortium of South African
banks and will consist of a mix of equity and debt finance
* Electrical self-generation contingency of R168 million taken into account
to allow for possible electricity supply delay by Eskom
* The total run of mine (ROM) production would be 2,76 million tons of ore
per annum, producing an average of 350 000 PGE(4) ounces at steady state
yielding a total of 10 million ounces
* Production profile starts with a combination of tonnage output from the
two reefs, building up to 180 000 tpm from Merensky and 50 000 tpm from
UG2. Once the Merensky is depleted, the output profile shifts to 230 000
tpm from UG2
* Primary access through a twin vertical shaft system comprising of a 8,5 m
diameter downcast main, men and materials shaft (980 m depth) and an upcast
ventilation shaft/second outlet of 7,5 m diameter (910 m depth)
* Best mining practices confirm a hybrid mining method comprising
conventional drilling, blasting and cleaning with trackless transport of
ore
* Plant design includes primary one-stage crushing into a SAG mill with Mill-
Float-Mill-Float (MF2) circuit
Comment
Mike Solomon, Chief Executive Officer, said:
"This is a significant milestone in the short history of the project as we are
now undergoing the critical transition from a pure exploration play to being a
fully fledged platinum producer, over the next five years.
We are delighted with the results of the BFS, which was delivered a full year
ahead of schedule in terms of the January 2005 project plan. We have yet again
delivered on the promises made to investors at that time.
The study confirms the commercial viability of the project with a Net Present
Value of R9,5 billion and an IRR of 18 %, which are well within the commercial,
economic and technical parameters planned for at the outset of the project.
It also cogently demonstrates the success of the Reverse Engineering approach
that we have taken.
The proposed mine design, comprising an underground mine and a surface
concentrator plant, allows for fast production build-up and flexibility to
address the characteristics of the ore body. The estimated Life of Mine is 35
years at a monthly production rate of 230 000 tpm, producing an average of 350
000 PGE(4) ounces per annum when steady state is reached in 2016. First
production of ounces is scheduled for 2011 with a 5 year ramp to steady state.
The capital cost estimate of R5,6 billion is exected to peak in 2013. The
consortium of South African banks announced in December 2007 will act as lead
equity and debt arrangers to secure the necessary finance for the development
of the project.
We look forward to an exciting new stage in the company`s life as we continue
to build shareholder value through the capital construction phase."
Introduction
Wesizwe Platinum Limited has concluded its BFS and given the go-ahead for
the construction of a platinum mine on its core assets on the farms
Frishgewaagd portions1, 3, 4, and 11, and the farm Ledig portions 1 and 2.
The execution of the BFS was carried out by a core multi-disciplinary team
which included:
* Wesizwe EXCO and financial staff
* Wesizwe Platinum Owner`s Team
* TWP (study and potential EPCM contractor)
* Murray & Roberts Cementation (shaft sinking contractors)
* The Mineral Corporation (mineral advisors)
* TWP-ES (environmental consulting)
In addition, external third party reviews were conducted on many significant
aspects of the work and recommendations were incorporated into the BFS to
further optimise designs and models. Where appropriate, simulations were also
carried out to verify designs. The technical risk is considered manageable
as there are no new or unproven technologies incorporated in the project.
Commercial viability
The recommendation from the Pre-feasibility Study, published on 30 March 2007,
to take one option through to full feasibility formed the basis of the BFS.
The financial results of the study confirm that the project is commercially
viable. The Net Present Value (NPV) is R 9,5 billion including mineable
Inferred Resources (R4,7 billion excluding Inferred Resources) with a real
Internal Rate of Return (IRR) at 18% (16% excluding Inferred Resources).
These figures are calculated on a base commodity price of US $1,125/oz for
platinum, US $315 for palladium, US $4 200 for rhodium and US $650 for gold
converted to ZAR with a short-term exchange rate ranging from R7,57 to R8,90
in 2012 and a long-term exchange rate of R9,17 and real discount rate of 5%.
The project has a estimated life of mine of 35 years at a monthly production
rate of 230 000 tpm and producing an average of 350 000 ounces PGE(4) per
annum during steady state, at an average cash cost of R320/ton. It is worth
noting that the 230 000 tpm production rate is a major improvement on the 180
000 tpm envisaged during the Pre-feasibility Study stage and reflects the
underlying quality and size of the ore body, and extent of the proposed mine.
Metallurgical test work has also shown that the project is feasible and that
the proposed plant design should achieve the planned production performance.
Confirmation of the detailed metallurgical operating parameters will be
obtained once mining commences and bulk ore samples are made available for
further metallurgical test work.
Capital Costs
The base date (October 2007) capital cost estimate is R5,6 billion. This
figure includes an overall contingency of R275,3 million. An additional
electrical self-generation contingency of R168 million was taken into
account to allow for any electricity supply delays by Eskom.
Production profile
The production profile starts with a combination of tonnage output from the
two reefs, building up to 180 000 tpm from Merensky and 50 000 tpm from UG2.
Once the Merensky is depleted, the output profile shifts to 230 000 tpm from
UG2 with a mine life of 35 years.
Mining practices confirm a hybrid mining method comprising a combination of
conventional and mechanised mining of the two platinum reefs.
The Merensky and UG2 ore and waste will be handled in separate ore-passes and
silos as they are hoisted, and in the case of ore, treated separately. This
will be controlled by an integrated ore management system.
Funding
Wesizwe is not yet a cash generating entity and its exploration programme up
to BFS has been funded by equity. The construction phase of the project is
expected to be funded by way of a combination of equity and debt finance.
A consortium of South African banks (Deutsche Securities (SA) (Pty) Ltd, ABSA
Capital a division of ABSA Bank Limited, and the Development Bank of Southern
Africa Limited) has been mandated to arrange this finance. The banks will
provide a project debt and equity package and will assist with the equity
offering for the equity portion of the financing. The directors and management
of Wesizwe will determine the appropriate debt equity ratio for the project
finance.
Infrastructure Design
Wesizwe`s Frischgewaagd-Ledig Complex project will consist of an underground
mine and a surface concentrator plant. The current mine infrastructure designs
were conducted through a process of exacting iterations in parallel with the
updating of the geological studies. To this extent, the proposed design is
considered to represent the most appropriate method to exploit Wesizwe`s
mining block as it allows flexibility to address the structural geology.
This greenfield project takes into account the establishment of all surface
infrastructure, servitudes for bulk power and water supply, the sinking and
equipping of ventilation and main shafts, associated underground infrastructure,
ancillary excavations and access development to establish a footprint for full
production.
The mine design allows for fast production build-up to enhance shareholder
value in the project. The Wesizwe BFS has addressed the major activities with
sufficient technical details to give confidence to the estimates in accordance
with best practice.
The design of the shaft sinking and development, the largest capital cost
activity, involved Murray & Roberts Cementation from early on in the planning
phase, to ensure close alignment between the design engineers and the principal
contractors on cost estimation, project scheduling and project implementation.
This provides a high level of confidence in Wesizwe`s ability to deliver the
project on time and within budget.
The proposed access to the ore body is through the sinking of an independent
twin vertical shaft system. This will comprise of an 8,5 m diameter (depth 980
m) down-cast man, material and rock shaft and an up-cast ventilation shaft of
7,5 m diameter (depth 910 m). The shafts are strategically positioned to most
effectively access both reef planes.
The mine design is specifically designed to allow for optimum flexibility in
terms of mining method (conventional, mechnanised or hybrid) over the Life of
Mine and was guided by the latest geological information (structure as of June
2007 and block model as of August 2007) as well as the preliminary results
obtained from the 3D Geoseismic Survey confirming the presence of flat-lying
Merensky and UG2 reefs which should, to a greater or lesser extent, be amenable
to mechanised mining.
The intention is to build the concentrator plant in three modules that will
allow flexibility and ensure optimum PGM recoveries. The design includes primary
one-stage crushing into a SAG mill with Mill-Float-Mill-Float (MF2) circuit.
The plant will treat the Run-of-Mine ore to produce a concentrate that will be
sold through an off-take agreement to be finalised in due course.
Construction Programme
The BFS envisages a 58 month construction programme which will include sinking
activities and construction of the first module of the concentrator plant.
Scheduled construction will begin during the third quarter of 2008 with
production ramp up commencing in 2011 reaching steady state production of 230
000 tpm by 2016.
Conclusion
The results of the BFS are very positive and confirm that the project is
commercially viable with IRR at 18 % and Net Present Value of R9,5 billion.
The third party reviews by independent consultants confirm that there are no
major technical risks with the proposed designs.
The mining layout allows flexibility in term of mining method to overcome
possible unforeseen and difficult geological conditions.
Metallurgical test work has also shown that the project is feasible and that
the proposed plant design should achieve the planned production performance.
Wesizwe is delighted to proceed to the implementation phase of the project.
Johannesburg
31 March 2008
ENQUIRIES
College Hill
Fred Cornet
Tel: +27 (0) 11 447 3030
Wesizwe Platinum Limited
Tel: +27 (0) 11 994 4600
www.wesizwe.com
Date: 31/03/2008 07:36:03 Produced by the JSE SENS Department.
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