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28 may 2009

Pan African Resources will spend R105m to build a plant to extract platinum group metals (pgms) from tailings it acquired from its majority shareholder Metorex in a R71m cash purchase of Phoenix Platinum, miningmx.com reports.

Pan African is in talks with a number of institutions for project finance to build the plant, but it is possible the board could opt to stump up some cash towards plant construction, said CEO Jan Nelson.

It will take four months to wrap up a bankable feasibility study and then another 14 months to construct the plant, which could produce 12,000 oz of pgms and form the launch pad for alliances or consolidation of the tailings treatment sector to grow the business.

“This could become bigger than our gold business, but let’s not get ahead of ourselves,” Nelson told Miningmx.

Pan African shares reached a session high on the JSE on Thursday of 72 cents from a close of 67 cents. It was last trading at 70 cents.

Pan African, which is 55% owned by Metorex, has 100,000 oz/year of gold production a year from its Barberton mine in South Africa. It is exploring for gold in Mozambique, where it is talking to owners of land around its Manica site to build critical mass at the project.

The tailings Phoenix has access to hold about 360,000 oz of pgms, with a grade ranging between 1.11 to 4.18 grams per tonne. Recoveries are estimated at 55%.

The partners in the venture to extract chrome and pgms from the tailings can’t yet be identified. There are talks ranging over a number of issues including deposition sites, sourcing more tailings and placement of the plant, Nelson said.

The structure of the partnership sees Phoenix, which is 100% owned by Pan African, taking 75% post-tax benefit from two surface sources and paying a royalty on the third source. Of the current arisings 75% is attributable to Phoenix after tax.

Not securing deposition facilities at one of the partner’s sites could extend the starting date of the project by another 10 months, Nelson said.

Pan African will talk to Braemore Resources, which is commercialising its ConRoast technology to treat high chrome content platinum concentrate. Braemore has signed an agreement with Jubilee Platinum to use the technology on a tailings project.

“We will look at it. If they are up and running, their process to treat concentrate costs us less money and there’s no technical risk because it is new process, then yes, we’ll look at it,” Nelson said.

Pan African reckons its platinum concentrate will have a chrome content of about 12 to 13%, which should be suitable for one of the major platinum companies with which it has yet to conclude an offtake agreement.

“We still have to negotiate an offtake agreement with one of the major’s smelters. There will be a penalty for the chrome content and we have built that into our financial models just to see how robust the project is,” Nelson said.