TIDMPPN
RNS Number : 9686L
Platmin Limited
14 May 2010
PLATMIN LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2010
May 14, 2010
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") for the three months ended March 31, 2010 contains
"forward-looking information" which may include, but is not limited to,
statements with respect to the future financial and operating performance of
Platmin Limited (the "Company" or "Platmin"), its subsidiaries and affiliated
companies, and its mineral projects, the future price of platinum or other
Platinum Group Elements ("PGEs"), PGE production levels, mining rates, the
future price of other base metals, future exchange rates, the estimation of
mineral resources and reserves, the realization of mineral resource estimates or
their conversion into reserves, costs and future costs of production, capital
and exploration expenditures, including remaining project development
expenditure at the Pilanesberg Platinum Mine ("PPM"), costs and timing of the
development of new deposits, costs and timing of the development of new mines,
costs and timing of future exploration, requirements for additional capital,
government regulation of mining operations and exploration operations, timing
and receipt of approvals, licenses, and conversions under South African mineral
legislation, environmental risks, title disputes or claims, limitations of
insurance coverage and the timing and outcome of regulatory matters. Often, but
not always, forward-looking statements can be identified by the use of words
such as "plans", "expects", "is expected", "budget", "scheduled",
"estimates", "forecasts", "intends", "anticipates", "targeted" or
"believes" or variations (including negative variations) of such words and
phrases, or state that certain actions, events or results "may", "could",
"would", "might" or "will" be taken, occur or be achieved.
Forward-looking statements in this MD&A include, among others, the operation of
open-cast mining; forecast average annualized production rates at PPM for the 12
month period ending December 31, 2010; forecasts of actual production during the
12 month period ending December 31, 2010 and 2011; recovery rates and grade;
targets, estimates and assumptions in respect of platinum and other PGE prices
and production; the quantum of PPM development shortfalls; the completion of the
Sedibelo acquisition; and the timing and completion of definitive feasibility
work at the Mphahlele, Grootboom and Loskop Projects.
Such forward-looking statements are based on a number of material factors and
assumptions, including, that contracted parties provide goods and/or services on
the agreed timeframes, that equipment necessary for construction and development
is available as scheduled and does not incur unforeseen break downs, that no
labour shortages or delays are incurred, that plant and equipment functions as
specified, that geological or financial parameters do not necessitate future
mine plan changes, that no unusual geological or technical problems occur, and
that grades and recovery rates are as anticipated in mine planning.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
Platmin and/or its subsidiaries and/or its affiliated companies to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. Such factors include, among others,
general business, economic, competitive, political and social uncertainties; the
actual results of current exploration and mining activities; development and
operational risks; title risks; regulatory risks; conclusions of economic
evaluations and studies; fluctuations in the value of the United States dollar
relative to the Canadian dollar or South African rand; changes in project
parameters as plans continue to be refined; future prices of platinum or other
PGEs; possible variations of ore grade or recovery rates (including the
existence of potholes, faults and other geological conditions that may affect
the existence or recovery of resources and reserves); failure of plant,
equipment or processes to operate as anticipated; accidents, labour disputes,
industrial unrest and strikes and other risks of the mining industry; political
instability, insurrection or war; the effect of HIV/AIDS on labour force
availability and turnover; delays in obtaining governmental approvals or
financing or in the completion of development or construction activities, as
well as those factors communicated in the section entitled "Risk Factors" of
Platmin's current annual information form ("AIF") and its final short form
prospectus dated May 5, 2010, which can both be viewed at www.sedar.com.
Although Platmin has attempted to identify important factors that could cause
actual actions, events or results to differ materially from those described in
forward-looking statements, there may be other factors that cause actions,
events or results to differ from those anticipated, estimated or intended.
Forward-looking statements contained herein are made as of the date of this MD&A
and Platmin disclaims any obligation to update any forward-looking statements,
whether as a result of new information, future events or results or otherwise.
There can be no assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place undue
reliance on forward-looking statements due to the inherent uncertainty therein.
1. Introduction
The Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is provided to enable the reader to assess and understand
the financial position and results of operations for the three months ended
March 31, 2010, in comparison to corresponding periods. Certain information in
this MD&A must be read in conjunction with the audited consolidated financial
statements of Platmin for the year ended December 31, 2009 (prepared in
accordance with International Financial Reporting Standards ("IFRS")).
The MD&A should be read in conjunction with the condensed consolidated interim
financial statements for the three months ended March 31, 2010 and supporting
notes.
The MD&A should also be read in conjunction with the company's Annual
Information Form ("AIF") and the technical reports prepared by qualified persons
in accordance with NI 43-101 on file with the Canadian provincial securities
regulatory authorities. These documents can be found at www.sedar.comand at
www.platmin.com.
All dollar amounts in this MD&A are expressed in United States dollars ("US$"),
unless otherwise specified. When used, C$ refers to Canadian dollars. References
to quarters are to financial quarters and not to calendar quarters, unless
otherwise specified.
2. Overview
Platmin Limited (the "Company" or "Platmin") is continued under the laws of
British Columbia, Canada and its common shares are listed on the Toronto Stock
Exchange ("TSX"), the Alternative Investment Market of the London Stock Exchange
("AIM") and the Johannesburg Securities Exchange Limited ("JSE"). The Company
trades under the symbol "PPN" on both TSX and AIM, whilst the symbol
"PLN"
identifies the shares on the JSE.
Platmin is a mineral exploration, development and operating company engaged in
the exploration for, development of and operation of mines exploiting Platinum
Group Element ("PGE") deposits in South Africa. The Company has developed and
completed the construction of PPM, which is currently ramping up to full
production, and is exploring for PGEs on its other three key projects namely
Mphahlele, Grootboom and Loskop.
The Group changed its financial year end from the last day of February in each
calendar year to the last day of December, effective for the period ending
December 31, 2009. As a result of the change in year end, and the requirements
of the Ontario Securities Commission ("OSC") for comparable quarters the
comparatives for the quarter ending February 28, 2009, are not directly
comparable with the current balances for the quarter ended March 31, 2010.
3. Overall Performance
The Company recorded a loss for the quarter ended March 31, 2010 of US$5.181
million, or a loss per share of US$0.01, compared with a net loss of US$12.490
million or a net loss per share of US$0.07, for the quarter ended February 28,
2009. The decrease in loss quarter on quarter was principally the result of
consulting and professional fees of US$0.172 million in the quarter under review
compared consulting and professional fees of US$7.061 million for the quarter
ended February 28, 2009. The consulting and professional fees expense in the
quarter ended February 28, 2009 relate to the Pallinghurst transaction concluded
in December 2008.
The principal focus of the Company's operations is the development and operation
of PPM. For a full description of the development activities, please refer to
section 7.1 of this MD&A.
As at the quarter ended March 31, 2010, total plant capital expenditure at PPM
amounted to US$266.625 million (ZAR1.953 billion) compared to US$266.079 million
(ZAR1.949 billion) at the financial year ended December 31, 2009. As at March
31, 2010, the total outstanding plant capital expenditure to completion of the
construction phase was US$16.102 million (ZAR117.948 million) which will bring
the total projected plant capital expenditure to US$282.727 million (ZAR2.071
billion). This amount is higher than the original amount per the BFS of ZAR1.670
billion (which equated to US$231.940 million based on an exchange rate of
ZAR7.20 at the time of the study), due to changes in scope, particularly the
inclusion of a10MVA standby power station (see page 7 of this MD&A), cost
increases experienced in general terms by the global mining industry over the
past two years and variances in foreign exchange rates.
As at March 31, 2010, the total project capital expenditure, for the development
of PPM, including capitalised pre-production costs, plant capital expenditure
and offsetting revenue from metal sales during the pre-production phase amounted
to US$440.815 million (ZAR3.229 billion). Outstanding plant capital expenditure
to completion of the construction phase of US$16.102 million (ZAR117.948
million) will bring the total project capital expenditure spent to US$456.917
million (ZAR3.347 billion). During the quarter under review, the ramp-up of
mining operations to commercial production continued with associated costs
capitalized as part of the total project capital expenditure.
On May 13, 2010, the Company issued, by way of a prospectus offering, a total of
205,761,317 new common shares of Platmin at a price of $1.215 per common share
for gross proceeds of US$250 million. The transaction included (i) 95,358,025
common shares being underwritten by RBC Capital Markets and Investec Bank
Limited for gross proceeds of US$115,860,000; and (ii) the balance being
acquired directly from Platmin in the form of a subscription for 41,152,263
common shares by Ridgewood Investments (Mauritius) Pte Ltd ("Ridgewood"), an
indirect subsidiary of Temasek Holdings (Private) Limited ("Temasek"), and a
subscription for 69,251,029 common shares by Platmin's largest shareholder,
Pallinghurst.
In light of the fact that the board has decided to focus cash resources and
capacity on bringing the PPM into full production, the Mphahlele, Grootboom and
Loskop projects have been placed on a reduced work program for the short term.
Platmin will commit sufficient expenditure to these projects to ensure that the
new order Prospecting and Mining Rights are preserved. This expenditure will be
funded from existing cash on hand and where necessary, additional funding will
be raised to fund future exploration and development expenditure.
Significant developments in the three months ended March 31, 2010 were as
follows:
· On March 22, 2010, a subsidiary of Platmin entered into a ZAR191 million
(an equivalent of US$26.0 million at an exchange rate of ZAR7.38 = US$1) short
term lending facility with Pallinghurst Resources Limited ("Pallinghurst"). As
at the date of this MD&A, the first tranche of ZAR95.5 million (an equivalent of
US$13.0 million) had been drawn against this facility.
· On March 29, 2010, the company entered into an agreement with Ridgewood to
purchase a non-interest bearing secured Convertible Debenture with a principal
amount of US$100 million and with a maturity date of December 31, 2010. Until
converted, the US$100 million will be deposited and held in a cash
collateralized account. The funds will be released to Platmin upon conversion in
full, at the sole discretion of the holder, into 82,304,526 common shares at a
price of US$1.215 per common share (being an effective price of C$1.25). In the
event the convertible debenture is not converted in full prior to the maturity
date, the funds will be returned to the subscriber.
Important events which occurred subsequent to March 31, 2010 include:
· On April 16, 2010 the company concluded an agreement to acquire the 10%
interest in the Sedibelo Platinum Project ("Sedibelo") held by Barrick Gold
Corporation ("Barrick") for a consideration of US$15 million. In addition,
Barrick has undertaken to transfer to Platmin, at cost, various long lead items
required for the development of Sedibelo. The final consideration, up to US$45
million, is still to be determined.
· On April 16, 2010 the company filed a preliminary short form prospectus in
Canada in connection with a US$250 million marketed offering of new common
shares.
· On May 4, 2010, Pallinghurst Investor Consortium ("Pallinghurst") and
Investec Bank Limited ("Investec") each subscribed for US$30 million and US$5
million, respectively, of principal amount of a non-interest bearing secured
convertible debentures on the same terms and conditions as the Convertible
Debenture issued to Ridgewood. If Pallinghurst converts its convertible
debenture in full, a total of 24,691,358 shares will be issued to Pallinghurst.
· On May 5, 2010, following a marketing period, the Company agreed to issue
205,761,317 new common shares at a price of US$1.215 per common share for a
total consideration of US$250 million. An aggregate of 95,358,025 common shares
are being underwritten by RBC Capital Markets and Investec Bank Limited for
gross proceeds of US$115.860 million with the balance of US$134.140 million to
be acquired directly from Platmin by Ridgewood Investments (Mauritius) Pte Ltd,
an indirect subsidiary of Temasek Holdings (Private) Limited, Algemene Pensioen
Groep N.V., and Platmin's largest shareholder, Pallinghurst Investor Consortium
(Lux) S.a.r.l. As part of the funds-raising process US$135 million of
convertible debentures have been placed. The total funding from the prospectus
offering and private placement is US$385 million.
· The sales of the convertible debentures to Ridgewood, Pallinghurst and
Investec each closed concurrently with the closing of the prospectus offering on
May 13, 2010.
· On May 13, 2010, the Company completed the previously announced issuance
of 205,761,317 new common shares at a price of US$1.215 per common share for a
total consideration of US$250 million, and the issuance of US$135 million of
convertible debentures.
4. Selected Quarterly Results
Expressed in US$'000 except per share amounts.
+------------+--------+--------+---------+--------+--------+---------+-------+
| | In accordance with IFRS |
+------------+---------------------------------------------------------------+
| | Mar'10 | Nov'09 | Aug'09 | May | Feb | Nov | Aug |
| | | | | '09 | '09 | '08 | '08 |
+------------+--------+--------+---------+--------+--------+---------+-------+
| Loss / | 5,181 | 2,276 | (6,620) | 13,585 | 12,490 | (6,686) | 3,387 |
| (profit) | | | | | | | |
| for the | | | | | | | |
| period | | | | | | | |
+------------+--------+--------+---------+--------+--------+---------+-------+
| Basic and | 0.01 | 0.01 | (0.02) | 0.03 | 0.07 | (0.06) | 0.03 |
| diluted | | | | | | | |
| loss / | | | | | | | |
| (profit) | | | | | | | |
| per share | | | | | | | |
+------------+--------+--------+---------+--------+--------+---------+-------+
5. Results of Operations
Quarter ended March 31, 2010 compared to the quarter ended February 28, 2009
For the quarter ended March 31, 2010, mining and processing activities continued
in the ramp-up phase to commercial production and the delivery of PGE
concentrate to Northam continued at regular intervals. As a development stage
company, Platmin will offset revenue from mining activities against capitalised
operating costs until such time as PPM is brought into commercial production. In
accordance with IFRS, revenue is recognised when the transfer of the risks and
rewards of ownership takes place. During the quarter under review, revenue
recognised in respect of concentrate deliveries made to Northam was offset
against capitalized project development costs.
For the quarter ended March 31, 2010, development expenditure at PPM capitalized
against project capital expenditure of US$36.023 million (ZAR269.656 million)
was offset by US$18.503 million (ZAR138.506 million) of operating revenue. For
the quarter ended February 28, 2009, development expenditure at PPM capitalized
against project capital expenditure was US$18.738 million (ZAR187.085 million).
As PPM was still in the development phase, there was no operating revenue for
the quarter ended February 28, 2009.
The Company recorded a net loss for the quarter ended March 31, 2010 of US$5.181
million, or US$0.01 per share, compared with a net loss of US$12.490 million, or
a loss of US$0.07 per share, for the quarter ended February 28, 2009. The
results are summarized as follows:
+--------------------------------------+----------+----------+
| | For the three |
| | months ended |
+--------------------------------------+---------------------+
| | March | February |
| | 31, | 28, |
| | 2010 | 2009 |
| | $ 000 | $ 000 |
+--------------------------------------+----------+----------+
| General expenses | (4,393) | (12,716) |
+--------------------------------------+----------+----------+
| Other (expenses) / income | (9) | 1,508 |
+--------------------------------------+----------+----------+
| Finance costs | (779) | (1,282) |
+--------------------------------------+----------+----------+
| Loss profit before taxation | (5,181) | (12,490) |
+--------------------------------------+----------+----------+
| Income tax | - | - |
+--------------------------------------+----------+----------+
| LOSS FOR THE PERIOD | (5,181) | (12,490) |
+--------------------------------------+----------+----------+
General expenses totalled US$4.393 million for the quarter ended March 31, 2010,
compared to the US$12.899 million for the quarter ended February 28, 2009. The
decrease in general operating expenses was principally the result of increased
consulting and professional fees during the quarter ended February 28, 2009,
associated with the Pallinghurst transaction concluded in December 2008.
Other expenses and income includes foreign exchange losses of US$0.009 million
for the quarter ended March 31, 2010, compared to foreign exchange gains of
US$1.507 million for the quarter ended February 28, 2009. The net decrease in
foreign exchange gains was due to the strengthening of the South African Rand
against other foreign currencies and the resultant differences in the closing
and average exchanges rates quarter on quarter. For the quarter under review,
the South African Rand exchange rate to the US dollar moved within a range of
ZAR7.77 and ZAR7.23 to US$1.00 compared to a range of ZAR9.28 and ZAR10.51 to
US$1.00 for the quarter ended February 28, 2009.
Finance costs of US$0.779 million were recorded in the quarter ended March 31,
2010, compared to US$1.282 million in the quarter ended February 28, 2009. The
net decrease in finance costs is due to the bridge loan facility with the
Standard Bank of South African Limited ("Standard Bank") being repaid on August
31, 2009.
A total of US$0.422 million (ZAR3.092 million) of deferred exploration
expenditure was capitalized in the quarter ended March 31, 2010 compared with
US$1.666 million (ZAR12.207 million) in the quarter ended February 28, 2009.
This decrease in costs is due to reduced activities on all projects in the short
term, whilst PPM ramps up to commercial production.
6. Liquidity and Capital Resources
The Company had cash and cash equivalents of US$17.892 million at March 31,
2010, as compared with US$127.950 million at February 28, 2009. The net decrease
in cash and cash equivalents is primarily due to the settlement of the bridging
finance facility, costs associated with plant capital expenditure and
pre-production costs incurred during the ramp-up of operations at PPM.
The Company finances its exploration and development activities by raising
capital from equity markets or debt funding and through contributions by joint
venture partners. Funding requirements for the Company's projects have
historically been satisfied through the advance of shareholders' loans, by
Platmin and Boynton Investments (Pty) Ltd ("Boynton") or subscription for shares
(rights issues to shareholders of Boynton). The shareholders' agreements or
joint venture agreements of Platmin's subsidiaries also generally make provision
for the board of directors of each relevant company to seek finance on behalf of
each company, although this has not been utilized to date. The expenditure for
future exploration and development projects may require that the Company raise
additional funds.
The Company's principal subsidiary, Boynton, operates in South Africa and as a
result is subject to the South African Reserve Bank ("SARB") exchange control
regulations. Shareholder loans from Platmin to Boynton, amounted to US$444.160
million (which includes capitalised interest of US$25.590 million) at March 31,
2010. Any repayment of foreign currency loans by a South African company to an
offshore company, are subject to prior approval by the SARB.
Bridging finance facility
A bridge loan facility for PPM of US$35 million (ZAR350 million) was concluded
with Standard Bank in May 2008. The bridge loan facility was used to fund a
portion of the costs associated with the development and construction of PPM.
The term of the bridge loan facility was initially to August 31, 2008 but
subsequently extended to August 31, 2009. At the outset, the facility incurred
interest at the Johannesburg Interbank Lending Rate ("JIBAR") plus 3.0%. From
March 1, 2009 to August 31, 2009, Platmin provided cash collateral to Standard
Bank of US$49.870 million (ZAR387.800 million) as security against the loan.
This resulted in a reduction in the interest rate to JIBAR plus 0.5%. The
Company earned interest at JIBAR plus 0.1% on cash collateral, bringing the net
finance cost on the loan to 0.4%. At the financial quarter ended August 31, 2009
the outstanding balance on the bridge loan facility was US$51.987 million
(ZAR404.354 million) but has subsequently been repaid in full on September 3,
2009.
In relation to the original bridge loan facility, the Company issued 300,000
warrants at $6.95 per common share, exercisable from September 15, 2008 until
expiry on May 14, 2011. The Company has classified this facility as held to
maturity, and the fair value of the warrants of US$0.846 million has been
treated as a cost of the loan transaction. In the year ended February 28, 2009,
the fair value of these warrants was fully amortized to net income over the
original loan term of 6 (six) months, using the effective interest method.
New equity raisings
On May 13, 2010, the Company completed an issuance of 205,761,317 new common
shares at a price of US$1.215 per common share for a total consideration of
US$250 million, and the issuance of US$135 million of convertible debentures.
Common shares to the value of US$115.860 million were underwritten by RBC
Capital Markets and Investec Bank Limited, while shares to the value of
US$134.140 million were acquired directly from Platmin by Ridgewood Investments
(Mauritius) Pte Ltd, an indirect subsidiary of Temasek Holdings (Private)
Limited, Algemene Pensioen Groep (APG) N.V., and the Pallinghurst Investor
Consortium (Lux) S.a.r.l. The total funding from the prospectus offering and
private placement is US$385 million. Proceeds from the convertible debenture
financing have been deposited to cash collateralized accounts, and in the event
the convertible debentures are not converted in full prior to the maturity date,
the principal amount will be returned to the holders.
As at March 31, 2010, the Company had 445,018,352 common shares in issue
compared to 370,002,800 common shares in issue as at February 28, 2009.
7. Results of Operations by Project
In the quarter ended March 31, 2010, the Company spent US$36.023 million
(ZAR269.656 million) on development expenditure and US$0.422 million (ZAR3.092
million) on exploration expenditure. All development expenditure was spent on
PPM and was capitalized as project costs. Amounts spent on exploration were
capitalized with exploration expenditure on the various key projects as follows:
20% was spent on the Mphahlele Project, 7% was spent on the Grootboom Project;
60% was spent on the Pilanesberg Exploration projects and 13% spent on other
projects. A summary of the expenditures by project along with the current
proposed programs is set forth below.
7.1 Pilanesberg Platinum Mine
The Company has developed the Pilanesberg Project into the PPM, which
constitutes an open-cast mining operation and a processing plant, producing a
PGE concentrate for sale to Northam Platinum Limited ("Northam"), a third party
smelting and refining operation located approximately 60 kilometres from PPM by
road.
Due to the close proximity of the 'PGE-bearing' Merensky and UG2 reef horizons
in this part of the Bushveld complex, these two ore bodies are exploited in one
open-cast mining operation at PPM. Other economically viable reefs, commonly
known as the Pseudo reefs, are also present between the two aforementioned reef
horizons and will be extracted along with the Merensky reef as an overall
Silicate Package. The Silicate Package is processed in the Merensky circuit and
the UG2 reef horizon is processed in the UG2 circuit. Both concentrates are
blended and forwarded to Northam's smelter in South Africa, for further
processing into final metals under the current Concentrate Agreement entered
into on June 30, 2008 with Northam.
In March 2008, the removal of overburden and waste rock materials from the open
pit commenced. This was followed in December 2008 with the start-up of reef
mining. The mine is still in the ramp-up phase, building up to reach the planned
steady state extraction rates of over 400,000 total tonnes per month or over 5
million total tonnes per annum of reef. These targets are expected to be reached
by December 2010. A Reverse Circulation ("RC") grade control drilling program at
10 meter centers was put in place on the initial mining blocks of the
Tuschenkomst pit and is maintained a minimum of three months ahead of reef
mining. Mine planning continues to take place at PPM to continuously update the
mine scheduling on a short-term and long-term basis. The stock-piling of
PGE-bearing ore ahead of the processing plant commenced in December 2008 with
milling operations commencing in March 2009. The delivery of the first
concentrate to Northam took place on April 1, 2009.
During the quarter under review, a total of 3.911 million cubic meters of
top-soil and waste material was removed from the pit, and a total of 711,398 ROM
tonnes of reef mining took place. The extraction of reef ore during the quarter
was from the oxidised layer where metallurgical recoveries are traditionally
lower. As at March 31, 2010 the total stock pile of 883,535 ROM tonnes consisted
of 70,609 ROM tonnes of Merensky and UG2 ore and 812,926 ROM tonnes of low
grade, Dense Media Separation ("DMS") ore.
The total project development expenditures for the quarter ended March 31, 2010
of US$36.023 million (ZAR269.656 million) has been capitalized. Total
capitalized project development expenditure to date now stands at US$440.815
million (ZAR3.229 billion).
In July 2007, a Bankable Feasibility Study ("BFS") was completed and the total
estimated value of plant capital expenditure was ZAR1.670 billion. At the time
of the study, this translated to US$231.940 million at an estimated exchange
rate of ZAR7.20 to US$1.00. In November 2007, PPM entered into an agreement with
engineering firm Dowding, Reynard and Associates Engineering (Pty) Limited
("DRA") to implement the overall design and construction phase at PPM, including
the processing plant. The processing plant was designed based on two separate
processing circuits to crush, mill and float the ore from the UG2 and Merensky
reefs as two separate streams. In addition, the Merensky reef circuit includes a
DMS circuit to upgrade low grade ore. The overall design of the processing
plant was based on processing in excess of 5 million tonnes per annum of reef
ore, including low grade DMS material, milling in excess of 3.4 million tonnes
per annum of upgraded ore and producing 250,000 ounces of 3PGE+Au on an
annualized basis. The operation of the processing plant has been sub-contracted
to Minopex (Pty) Ltd, a division of DRA.
As part of the construction of PPM, a commitment was secured from ESKOM for the
supply of the 37MVA of new power by mid 2009 that is required for the full
operation of the processing plant. The first phase of the implementation plan
was completed by ESKOM in March 2009, with the installation of 14MVA of new
power supply for the operation of the UG2 circuit of the plant. Installation of
the remaining 23MVA of installed power was completed on June 7, 2009 allowing
for the commencement of the commissioning phase of the Merensky Reef circuit.
In addition to the regular power supply from ESKOM, the construction of a
complete 10MVA standby diesel generator power plant ("power plant") at a cost of
US$19.707 million (ZAR144.350 million), has been completed at PPM. This facility
is capable of providing sufficient power to run the UG2 section of the
processing plant on an ongoing basis in the event that ESKOM is unable to
provide constant power to the mine over an extended period of time, it is also
able to provide sufficient additional power if ESKOM reduce the contracted power
supply to the mine by up to 10MVA. This 10 MVA power plant was commissioned on
December 2, 2009.
Construction of the processing plant commenced in October 2007 and was completed
during the first quarter of the current financial year. In March 2009, the
processing of material through the UG2 circuit commenced, signalling the
commencement of the plant operation to produce a metal in concentrate ready for
smelting, refining and sale under the Concentrate Agreement to Northam. In June
2009, following the installation by ESKOM of the additional 22MVA of power, the
processing of material through the Merensky circuit commenced. Final
commissioning will take place subsequent to quarter end.
For the quarter ended March 31, 2010, the Company dispatched and sold 14,177 PGE
ounces and subsequently recognised revenue to the value of US$18.503 million
(ZAR138.506 million). As a development stage company, these receipts are offset
against the capitalized project costs until such time that commercial production
is reached.
As at the quarter ended March 31, 2010, total plant capital expenditure at PPM
amounted to US$266.625 million (ZAR1.953 billion) compared to US$266.079 million
(ZAR1.949 billion) at the financial year ended December 31, 2009. As at March
31, 2010, the total outstanding plant capital expenditure to completion of the
construction phase was US$16.102 million (ZAR117.948 million) which will bring
the total projected plant capital expenditure to US$282.727 million (ZAR2.071
billion). This amount is higher than the original amount per the BFS of ZAR1.670
billion (which equated to US$231.940 million based on an exchange rate of
ZAR7.20 at the time of the study), due to changes in scope, particularly the
inclusion of a10MVA standby power station, cost increases experienced in general
terms by the global mining industry over the past two years and variances in
foreign exchange rates.
As at March 31, 2010, the total project capital expenditure, for the development
of PPM, including capitalised pre-production costs, plant capital expenditure
and offsetting revenue from metal sales during the pre-production phase amounted
to US$440.815 million (ZAR3.229 billion). Outstanding plant capital expenditure
to completion of the construction phase of US$16.102 million (ZAR117.948
million) will bring the total capital expenditure spent to US$456.917 million
(ZAR3.347 billion).
During the quarter under review, the ramp-up of mining operations to commercial
production continued with associated costs capitalized as part of the total
project capital expenditure.
Platmin plans to conduct further exploration in the vicinity of PPM with the
view to increasing its mineral resource base in the Pilanesberg area.
7.2 Pilanesberg Exploration projects
The total exploration expenditure on various Pilanesberg exploration projects
totalled US$0.252 million (ZAR1.847 million) for the quarter ended March 31,
2010. Total exploration expenditure since the inception of the Pilanesberg
Project of US$15.449 million (ZAR113.163 million), has been capitalized. In
accordance with the Group's accounting policies, these costs are capitalised as
part of "Exploration and evaluation assets".
Work program
The Pilanesberg exploration projects consist of properties adjacent to PPM. The
focus is on advancing earlier stage properties, through programs of soil
sampling, trenching, percussion drilling and ultimately diamond drilling.
Platmin is also conducting limited chrome exploration on properties in the
Pilanesberg Project area where these rights are held.
7.3 Mphahlele Project
In the quarter ended March 31, 2010, a total of US$0.083 million (ZAR0.608
million) was spent on the Mphahlele project bringing the cumulative expenditure
to date on the project by the Company to US$12.889 million (ZAR94.411 million),
excluding acquisition costs. In accordance with the Group's accounting policies,
these costs are capitalised as part of "Exploration and evaluation assets".
During the quarter under review, the Company continued with the Definitive
Feasibility Study ("DFS)" on the Mphahlele project.
Work program
In light of the fact that the board have decided to focus cash resources and
management on bringing PPM into full production, this project has been put on a
reduced work program for the short term. The reduced primary expenditure at
Mphahlele during the 2010 fiscal year is expected to be limited to activities
related to the DFS including metallurgical test work, and revision of resource
models to include mining dilution (various scenarios), mining design,
geotechnical investigations and the environmental impact assessment/management
program.
The Social and Labour Plan, which is a program covering the social and economic
development plan for the communities affected by the operations, was completed
during August 2008 and was submitted in September 2008 to the Department of
Mineral Resources ("DMR"), as required for the approval of the mining right. The
DMR subsequently approved the plan.
7.4 Grootboom Project
In the quarter ended March 31, 2010, the Company spent US$0.031 million
(ZAR0.230 million) on Grootboom and Annex Grootboom (upon which Platmin has an
option to acquire the PGE rights on completion of a DFS), bringing the
cumulative expenditure to date on the project to US$5.845 million (ZAR42.817
million). In accordance with the Group's accounting policies, these costs are
capitalised as part of "Exploration and evaluation assets".
The project advanced to the DFS stage during the quarter under review. The DFS
is expected to be completed in the third quarter of fiscal 2010.
Work program
In light of the fact that the board have decided to focus cash resources and
management on bringing PPM into full production, this project has been put on a
reduced work program for the short term. The reduced primary expenditure at
Grootboom during the 2010 fiscal year is expected to be limited to activities
related to the DFS including metallurgical test work, and the revision of
resource models to include mining dilution (various scenarios), mining design,
geotechnical investigations and the environmental impact assessment/management
program.
7.5 Loskop Project
Lonmin Plc is the operator of the Loskop Project and funds all exploration
expenditures on the project (except for a portion of Rietfontein as mentioned
below), as part of their option to acquire 50% in the joint venture. As a result
thereof, limited expenditure has been incurred by Platmin.
In the quarter ended March 31, 2010, the Company incurred less than US$0.001
million (ZAR0.008 million) on the Loskop Project. Total cumulative exploration
expenditure on this project since inception is US$0.850 million (ZAR6.228
million). In accordance with the Group's accounting policies, these costs are
capitalised as part of "Exploration and evaluation assets".
Work program
Lonmin Plc announced in a press release on November 18, 2008 that their
management has decided, given their focus on cash management and the current
state of the worldwide credit markets, to put a number of their projects,
including Loskop, on a reduced work program for the short term. This is likely
to affect the work program at Loskop in the 2010 financial year.
Although work has continued during the year in order to assist in increasing our
understanding of the Loskop mineralization, the mineral resources were not
revised during the quarter ended March 31, 2010.
8. Contractual Obligations
The Company's contractual obligations are as follows:
+-----------------+-----------------+--------+---------+--------+--------+
| Contractual | Payments due by period as at March 31, |
| obligations | 2010 |
| US$'000 | |
+ +------------------------------------------------------+
| | Total | < 1 | 1-3 | 4-5 | After |
| | | year * | years | years | 5 |
| | | | | | years |
+-----------------+-----------------+--------+---------+--------+--------+
| Employee | 349 | 349 | - | - | - |
| entitlements | | | | | |
+-----------------+-----------------+--------+---------+--------+--------+
| Operating lease | 382 | 138 | 244 | - | - |
+-----------------+-----------------+--------+---------+--------+--------+
| Committed | 16,102 | 12,393 | 3,709 | - | - |
| Capital Cost | | | | | |
| (1) | | | | | |
+-----------------+-----------------+--------+---------+--------+--------+
| Asset | 86,741 | - | - | - | 86,741 |
| Retirement | | | | | |
| Obligation (2) | | | | | |
+-----------------+-----------------+--------+---------+--------+--------+
| Mining and | 465,845 | 74,465 | 292,094 | 99,286 | - |
| Processing | | | | | |
| costs (3) | | | | | |
+-----------------+-----------------+--------+---------+--------+--------+
| Total | 569,419 | 87,345 | 296,047 | 99,286 | 86,741 |
| Contractual | | | | | |
| Obligations | | | | | |
+-----------------+-----------------+--------+---------+--------+--------+
(1) The Committed Capital Cost includes outstanding amounts in respect of
plant capital expenditure to the completion of the plant construction project.
(2) This amount represents the gross asset retirement obligation incurred to
date, to rehabilitate the opencast pit and plant at PPM at the end of life of
mine, in accordance with the mining licence, The amount disclosed in note 9 of
the condensed consolidated interim financial statements of $64,985 million
represents the discounted value of such amount.
(3) Committed mining expenses include the remaining value of the agreement
with engineering firm DRA to implement the design and construction phase of PPM,
the contracts with Minopex for managing the plant operations and maintenance of
the Merensky and UG2 metallurgical concentrator plants, and MCC for carrying out
the opencast mining operations.
9. Off-Balance Sheet Arrangements
The Company has not entered into any off-balance sheet transactions.
10. Related Party Transactions
On April 22, 2010, the Company entered into a ZAR191.0 million (an equivalent of
US$26 million at an exchange rate of ZAR7.39 =US$1.00) short term lending
facility with Pallinghurst.
11. Proposed Transactions
The Company continues to evaluate opportunities in the market with a view to
expand the current business. At the current time there are no reportable
proposed transactions.
12. Black Economic Empowerment ("BEE")
Pursuant to the investors and subscription agreement entered into in December
2008 with, among others, Ivy Lane Capital Limited, being the South African
investment vehicle of the Pallinghurst Investor Consortium, the
Bakgatla-Ba-Kgafela Tribe and the Bakgatla Pallinghurst JV (Proprietary)
Limited, the Moepi Group was required by March 31, 2010, subject to certain
conditions precedent, to exchange its 27.61% interest in Boynton for common
shares in Platmin ("The Moepi Exchange"). Not all the conditions were satisfied
by March 31, 2010 and the parties to the agreement agreed not to extend the
fulfilment date thereof and accordingly the Moepi Exchange was not completed.
Platmin has funded a total of US$9.536 million on behalf of its BEE partners for
exploration activities, by way of loan account to date. All such amounts remain
outstanding on inter-company loan accounts.
13. Environmental Matters
The Company conducts exploration on its key projects and prospects subject to
mineral exploration permit applications made to and issued by the DMR. For each
exploration program, a rehabilitation plan is included with the application and
where required the appropriate bond or funds are lodged with the relevant agent
of the DMR in respect of the rehabilitation work which may have to be carried
out when the exploration program is completed and no further work is planned on
the property. All such environmental plans or bonds are in the normal course of
the business.
In respect of PPM, the DMR required a rehabilitation guarantee of US$7.027
million before approving the application for a Mining Right. This guarantee has
been provided by Guardrisk Insurance Company Limited ("Guardrisk") on an
insurance basis, with an amount of US$1.835 million (ZAR13.500 million) paid
over into a separate PPM bank account and ceded in favour of Guardrisk as
collateral against the issuance of this guarantee. Ongoing contributions are
made by PPM to fund the balance of the liability over the remaining life of
mine. Further guarantees to the amount of US$14.268 million (ZAR104.987 million)
have been provided to ESKOM on the same basis.
In respect of the Mphahlele Project, the DMR required a rehabilitation guarantee
of US$2.135 million (ZAR16.609 million) before the issuing of the Mining Right.
This guarantee has been provided by Guardrisk on an insurance basis, with an
amount of US$1.576 million (ZAR11.600 million) paid over into a separate Boynton
bank account and ceded in favour of Guardrisk as collateral against the issuance
of this guarantee. Ongoing contributions are made by Boynton to fund the balance
of the liability over the remaining life of the prospecting permit.
In respect of the Grootboom project, negotiations with the DMR are currently in
progress to determine the amount of the rehabilitation guarantee required by the
DMR before it issues the Mining Right.
Environmental guarantees are released by the DMR on completion of the
obligations in terms of the rehabilitation plans contained within either the
application for the prospecting permits, or the mining right.
14. Mineral and Petroleum Resources Royalty Act, 2008 (Act no. 28 of 2008)
The South African government has enacted the Mineral and Petroleum Resources
Royalty Act (the "Royalty Act"), which imposes a royalty payable to the South
African government by businesses based upon financial profits made through the
transfer of mineral resources.
The legislation was passed on November 17, 2008 and was due to come into
operation on May 1, 2009. During his budget speech in February 2009, the South
African Minister of Finance deferred the implementation of the Royalty Act to
March 1, 2010. In terms of the legislation resulting from the Royalty Act, a
royalty will be levied for the benefit of the National Revenue Fund of the
government of the Republic of South Africa. The amount levied will be based on a
percentage calculated by means of a formula, from a minimum of 0.5% up to a
maximum of 5% on gross sales of refined mineral resources or 7% on gross sales
of unrefined mineral resources.
15. Critical Accounting Estimates
The Company's significant accounting principles and methods of application are
disclosed in the notes of the Company's consolidated financial statements for
the year ended December 31, 2009. The following is a discussion of the critical
accounting policies and estimates which management believes are important for an
understanding of the Company's financial results.
Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The Group's functional currency, as
determined at the transition date of March 1, 2008, is the South African Rand
("ZAR"). The consolidated financial statements are presented in US dollars
("USD") which is the Group's presentation currency for purposes of dual listing
and foreign shareholders.
The results and financial position of all the Group entities (none of which has
the currency of a hyper-inflationary economy) that have a functional currency
different from the presentation currency are translated into the presentation
currency as follows:
- assets and liabilities for each statement of financial position presented
are translated at the closing rate at the date of that financial period end;
- income and expenses for each statement of income and comprehensive income
are translated at average exchange rates (unless this average is not a
reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the rate
on the dates of the transactions);
- equity transactions are translated using the exchange rate at the date of
the transaction; and all resulting exchange differences are recognized as a
separate component of equity.
Exploration and evaluation assets and development expenditure
Exploration and evaluation costs, including the cost of acquiring licenses, are
capitalized as exploration and evaluation assets on a project-by-project basis
pending determination of the technical feasibility and the commercial viability
of the project. The capitalized costs are presented as either tangible, or
intangible exploration and evaluation assets according to the nature of the
assets acquired.
Capitalised costs include costs directly related to exploration and evaluation
activities in the area of interest. General and administrative costs are only
allocated to the asset to the extent that those costs can be directly related to
operational activities in the relevant area of interest. When a license is
relinquished or a project is abandoned, the related costs are recognized in
profit and loss immediately.
Inventory
Inventories are measured at the lower of cost and net realisable value. The cost
of inventories includes expenditure incurred in acquiring the inventories,
production or conversion costs and other costs incurred in bringing them to
their existing location and condition.
Provisions
Provisions are measured at the present value of the expenditures expected to be
required to settle the obligation using a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to the
obligation. The increase in the provision due to passage of time is recognized
as interest expense.
The costs for the restoration of site damage, which arises during production,
are provided at their net present values and charged against their operating
profit as extraction progresses. Changes in the measurement of a liability which
arises during production are charged against operating profit.
The discount rate used to measure the net present value of the obligations is
the pre-tax rate that reflects the current market assessments of the time value
of money and the risks specific to the obligation.
In accordance with the Group's policy and applicable legal requirements, a
provision for decommissioning liabilities is recognized when the asset is
installed and rehabilitation liabilities are recognized when the land is
disturbed.
Revenue
The Group recognises revenue when the amount of revenue can be reliably
measured, it is probable that future economic benefits will flow to the entity
and when specific criteria have been met for each of the Group's activities as
described below. The amount of revenue is not considered to be reliably
measurable until all contingencies relating to the sale have been resolved.
Revenue from the sale of goods is recognized when the significant risks and
rewards of ownership have been transferred to the buyer. Revenue is not
recognized if there are significant uncertainties regarding recovery of the
consideration due.
No revenue is recorded in the condensed consolidated interim statement of income
and comprehensive income as the Pilanesberg Mine has not yet reached commercial
production.
16. Financial Instrument and Other Instruments
The Company has the following financial instruments: cash and cash equivalents,
other receivables, accounts payable, accrued liabilities and a bridge loan
facility. These instruments are short-term financial instruments whose fair
value approximates their carrying value given that their maturity period is
short.
17. Outstanding Share Data
As at March 31, 2010, the Company had 445,018,352 issued and outstanding common
shares.
As at March 31, 2010, there were 4,947,266 outstanding options exercisable for
common shares and a further 2,984,467 unvested share options, which, if
exercised, would result in the issue of an additional 2,984,467 common shares.
The total options outstanding at March 31, 2010, totalled 7,931,733 options.
As at May 14, 2010, the Company had 650,779,669 issued and outstanding common
shares.
18. Risks and Uncertainties
The Company is in the business of the exploration and development of mineral
properties and the operation of mines directly or through third parties. There
are numerous risks associated with this business and specific risks with regards
to the South African mining environment.
Readers are urged to review the section titled "Risk Factors" appearing in
Platmin's current AIF for the financial year ended December 31, 2009, which can
be viewed at www.sedar.com.
19. Internal control over financial reporting
Management has evaluated or caused to be evaluated, the effectiveness of the
Company's disclosure controls and procedures and the internal control over
financial reporting and concluded that the Company's disclosure and internal
control over financial reporting was effective as of the end of the financial
quarter ended March 31, 2010. Platmin has identified no material weakness in the
design of its internal controls over financial reporting. There has been no
change in Platmin's internal controls over financing reporting since its
year-end MD&A for the period ended December 31, 2009 or in the quarter ended
March 31, 2010, that has materially affected, or is reasonably likely to
materially affect, Platmin's internal controls over financial reporting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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