Ivanhoe Mines has released its much anticipated DFS on its US$1.544 billion Platreef 4 Elements (4E-platinum, palladium gold and rhodium) project in South Africa (DFS yet to be released on Sedar).
Key features of the Platreef DFS include:
- Indicated Mineral Resources at a 2 g/t 4E COG are 346 million tonnes at 1.7 g/t Pt, 1.7 g/t Pd, 0.1 g/t Rh and 0.3 g/t Au for 42 million ounces of Pt, Pd, Rh and Au with an additional 53 million ounces in Inferred Resources;
- Mineral Reserve containing 17.6 million ounces of platinum, palladium, rhodium and gold;
- Development of a large, mechanized, underground mine with an initial 4 Mtpa concentrator and associated infrastructure with plans to increase production incrementally to 12 MTPA;
- Planned initial average annual production rate of 476,000 ounces of Pt, Pd, Rhand Au(3PE+Au), plus 9,500 tonnes of nickel and 5,900 tonnes of copper in concentrates;
- 174 kt of concentrate will be produced at 38 g/t Pt, 39.1 g/t Pd, 2.4 g/t Rh, 5.3 g/t Au, 3.35 Ni and 5.5% Ni;
- Estimated pre-production capital requirement of approximately US$1.544 billion, at a ZAR:USD exchange rate of 13 to 1.
- After-tax Net Present Value (NPV) of US$916 million, at an 8% discount rate.
- After-tax Internal Rate of Return (IRR) of 14.2%.
The 14% IRR is less than appealing and they only got there by using some snappy metal prices: US$1,250 per ounce (current price $945) for Pt, $815/Oz ($835) for Pd, $1,300/ozs ($1,270) for Au and $1,000/oz ($900-990) for Rh.
So how to finance this project. Ivanhoe owns 64%, their Black Economic Empowerment (BEE) partner 26% and a Japanese consortium 10%. New legislation would see the BEE percentage increase to 30% and that has to be financed. Given the evolving political uncertainty in SA there might be some investor hesitation for a project in that country and which has a 14% IRR. We will watch with the usual interest.