Johannesburg - Emerging platinum company, Wesizwe Platinum, had adopted a contractor operator model for the first 10years of the Bakubung Platinum Mine, its anchor asset in Rustenburg, Jacob Mothomogolo, Wesizwe’s project executive, said on Friday.
Mothomogolo said that the 45 percent Chinese-owned company would mine and develop the R10.6 billion Bakubung project with the help of contractors and had the option to review its decision after 10 years.
The change of direction came as the low price environment and the global economic slowdown affected demand, squeezing the profit margins of platinum producers.
“The board decided at a meeting last month on the contract mining model not only as it is cheaper, but it would also help us mine more efficiently and reduce unit costs,” Mothomogolo said.
He said Wesizwe had set a target to appoint two contracting companies either from South Africa or abroad next March and expected the contractors to be on site by June.
Mothomogolo said the firm was comfortable with the decision as studies had shown that contract mining improved the ability of companies to achieve production targets.
“Wesizwe and the contractors will work together to develop the mine. It is not going to be a hands-off approach. The mine will be controlled and managed by Wesizwe and all the discipline heads, including geology, will be handled by Wesizwe,” he said.
Feasibility studies
Wesizwe planned to sign contracts that would be renewed every two to three years, Mothomogolo said.
Mothomogolo said the construction of the Bakubung operation was 34 percent complete with process plant infrastructure expected to be commissioned next year.
The mine is expected to produce 420 000 ounces of platinum group metals a year and production is expected to kick off next year.
Mothomogolo highlighted that a lot had changed since the company completed feasibility studies at the Bakubung mine, its anchor asset.
This included the mine’s shaft head operating cost ballooning by 25 percent to R580 a ton from R488 a ton as wages and electricity prices were higher after the Marikana massacre in mid-August 2012.
He also said the firm decided to hold back on the non-core features of the mine until economic conditions improved.
“(Wesizwe) went into cash preservation mode, and we held back on construction of non-critical features at the mine. For example, we have deferred the construction of an office park this year,” he said.
On Friday, Wesizwe’s executive manager of corporate affairs and investor relations, Hamlet Morule, said the company’s empowerment level was at 20.1 percent. This was well below the 26 percent required by the government, he said.
He also said Wesizwe had been in talks with the Department of Mineral Resources and Bakubung Ba Ratheo tribe on whose land the mine was situated on options to increase the empowerment level.
“A proposal was on the table to address the shortfall... we are speaking to a number of people who can help us raise the ownership by 6 percent.
“Anglo American, which holds a 13 percent stake in Wesizwe committed that should it need to offload its stake it will offload it to an empowerment entity,” Morule said.
BUSINESS REPORT