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To access more complimentary research reports from Fat Prophets click here.Sylvania Resources
Sylvania Resources
Border Collie
Sylvania Resources offers a simple business plan based on re-treatment of old tailings from former chromite mines situated in the world famous Bushveld Complex in South Africa. The region is known as the world's biggest platinum producing area and hosts the biggest reserves of Platinum Group Metals (PGMs) worldwide.
The company’s real interest is in the higher value platinum group metals contained in the tailings, which promise to generate significant earnings.
Given record PGM prices, and low capital and operating costs, the upside for Sylvania is enormous in our view. In fact, the company is ramping up production at a time when chromite supply out of South Africa is likely to be impacted by power problems.
In common with the rest of the South African platinum industry, Sylvania faces ongoing issues with electrical power supply. Plant operations have been disturbed by planned and unplanned 'load shedding' activities by the State utility, Eskom. On the positive side, Sylvania's operations use relatively little power and are significantly less affected by power cuts than is the case for underground mining operations.
Focussing on the company's operations, both the Millsell and Steelpoort operations have performed in line with management's internal targets during the half year ended 31 December 2007. Operations at these plants look set to further benefit from process improvement projects with a projected capital cost of about R30 million.
Elsewhere, construction of the Lannex plant is progressing and all long lead-time equipment items have been ordered. The plant will have double the capacity of the Millsell or Steelpoort plants, and looks set to be commissioned in the second half of calendar year 2008.
Meanwhile, construction of the Elandsdrift plant is expected to begin again towards the end of calendar year 2008.
The company's fifth project is its Chrome Tailings Retreatment Project (CTRP) – 25 percent owned by Sylvania South Africa (Pty) Ltd, a wholly owned subsidiary of the company.
The CTRP plant has been in production since January 2005, and has recorded a 43 percent improvement in attributable PGM production compared with the preceding six-month period.
Not ones to rest on their laurels, the company recently announced that it was to acquire an interest in ASX-listed Great Australian Resources Limited (GAU).
Whilst Sylvania remains a focused, tailings re-treatment company, the GAU deal shows that it is also aligning itself with companies that have potential hard rock near-surface platinum resources.
We maintain our faith in Sylvania Resources' simple but lucrative business model of tailings re-treating in South Africa, with rising PGM prices further adding to its attraction.
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