In another sign Anglo American Platinum is confident in the long-term fundamentals of the precious metal, it has agreed to purchase Glencore’s 39% interest in the Mototolo joint venture operation in the Bushveld of South Africa.
Amplats could pay up to R22 billion for the interest as part of a complex deal that involves an upfront cash payment of R0.8 billion on a “cash-free basis” and an additional consideration based on rand PGM prices over the life of mine.
This is Amplats’ second platinum group metal investment in as many weeks, with the company recently pledging $100 million towards two UK-based venture capital funds developing “innovative and competitive technological uses of PGMs”.
These developments come at a time when platinum prices remain subdued and many other companies, reliant on manual labour, are looking to scale back their exposure to the precious metals.
Amplats, on the other hand, is making money. In the first six months of the year, its EBITDA increased 70% year-on-year to R6.8 billion as it produced 4% more PGMs (2.58 million ounces ) and cut unit costs by 3%.
Mototolo is currently operated as a 50:50 JV between Amplats and a partnership of Glencore (39%) and Kagiso Tiso Holdings (11%). It produced 157,200 oz of PGMs in the first six months of the year, up 26% from the same period a year ago, due to higher built-up head grade and additional production rolled over from the second half of 2017.
Chris Griffith, Amplats CEO, said the increased interest in Mototolo, on the Eastern Limb of the Bushveld Complex, could lead to the company creating another major “PGM hub” that was, importantly, mechanised, low cost and had a high-quality resource.
Its Mogalakwena PGM hub on the northern side of the Bushveld Complex, another mechanised operation, is one of the most profitable operations within the group.
He also said the deal “unlocks significant optionality for the company in its wholly-owned Der Brochen resource”.
Der Brochen, 100% owned by Amplats, has 182.1 million tonnes of Merensky reef resources grading 4.37 g/t 4E PGE, plus 402.4 Mt of UG2 reef resources at 3.99 g/t 4E PGE.
The project has been within the Amplats portfolio for some time, but the company said combining the Mototolo JV area with the downdip and adjacent Der Brochen resource, could extend the current five-year life of mine to “well in excess” of 30 years. This is something the company is currently carrying out a study on.
The transaction is subject to a number of conditions, including competition commission approval, and is expected to complete in the December quarter of 2018.