Pan African Resources (AIM: PAF, JSE: PAN) has extended the due-diligence period for its proposed acquisition of a 25% stake in the RK1 Consortium, which operates a PGM (platinum group metals) concentrator plant in South Africa, from Ivanhoe Nickel & Platinum Limited for ZAR 53 million, or £4.8 million.
The transaction is subject to technical and financial due diligence investigation by Pan African, and the parties have agreed to extend the period for the completion of due diligence to 17 May 2010. The company announced the deal on 31 March, and due diligence was initially to be completed by the end of April.
Pan African said that the acquisition will allow it to gain access to low cost PGM ounces, strengthen earnings and operating cash flows, provide it with further growth opportunities and enable it to benefit from medium and long term demand for PGMs.
The company is acquiring Ivanhoe's wholly-owned units GB Mining and RKR Mining, which together hold a 25% participating interest in the RK1 Consortium. The other members of the RK1 Consortium are FTSE 250 constituent Aquarius Platinum (LSE: AQP), which holds a 50% participating interest, and Sylvania Resources (AIM: SLV)with a 25% interest.
The RK1 Consortium owns a chromite tailings retreatment plant (CTRP) situated at Kroondal on the Western Limb of the Bushveld Complex in the North West Province of South Africa which produces PGM concentrate. The Aquarius-operated CTRP treats old dump material and current tailings streams derived from the beneficiation processes employed by nearby chromite mines.
The CTRP produced 6,824 ounces, or 246,600 tonnes at 2.34g/t (grams per tonne) of four PGE (platinum group elements), including platinum (60.9%), palladium (21.9%), rhodium (16.9%) and gold (0.2%) at an average cost of US$332 per ounce for the 12-month period ended 30 June 2009. For the equivalent period of 2008 the CPRT produced 9,849 ounces (274,000 tonnes at 4.20 g/t) of four PGM at an average cost of US$360/oz. The decline in production was largely due to disruptions in tailings streams supplies. The company said that significant progress has been made with securing mid-term and long-term tailings supply sources.
The profit before tax attributable to the CTRP for the same period was approximately ZAR3.09 million 0.24 million compared to ZAR50 million, or 4.5 million in 2008.
Since the acquisition was announced last month, Pan African has made further progress in South Africa. Last week, the company confirmed that the South African Department of Mineral Resources (DMR) has approved and granted the conversion of the Barberton Mines Pty old order mining rights into new order mining rights (NOMR).
"The granting of new order mining rights creates long term stability for our business and demonstrates that South Africa remains an attractive place to conduct mining business", Pan African Chief Executive Jan Nelson commented.
The Barberton mining complex consists of three mines: Fairview, Consort and Sheba. Each mine will receive a NOMR, replacing the old order mining licenses 28/2003, 30/ 2003 and 29/2003.
The company has been improving efficiency and increasing production at Barberton, and consequently, earlier this month, Pan African raised its production forecast for the second half of the current financial year.
The Barberton mines are now expected to produce 97,000 ounces of gold - 318,000 tons at a head grade of 10.40 grams per tonne - for the full financial year 2010, with cash costs below ZAR165,000 (approx US$22,500) per kg.
The company is also developing the Phoenix Platinum Chromite Tailings Retreatment Plant (CTRP) in association with International Ferro Metals (LSE: IFL) (IFM). Pan Africans subsidiary Phoenix Platinum intends to build the plant at IFMs Lesedi operations to extract platinum group metals (PGM) from historic chrome tailings.