Ivanhoe Mines puts out economic study for South Africa mine

Wed Mar 26, 2014 10:08am EDT
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March 26 (Reuters) - Robert Friedland's Ivanhoe Mines Ltd's Platreef project in South Africa could produce some 785,000 ounces of platinum, palladium, rhodium and gold a year and operate for 36 years, according to a study released on Wednesday.

The preliminary economic assessment found that it would take about $1.7 billion in capital to bring the large, mechanized underground mine into production.

Friedland, an outspoken billionaire with a track record of picking winners, is one of very few investors looking seriously at building a new mine on South Africa's platinum belt.

While the country has a long history of mining, it has fallen out of favor with foreign investors amid ongoing labor strife. A nine-week strike on the platinum belt has hit 40 percent of global production and a vicious turf war between rival unions has killed dozens of people the past two years.

Geology makes it difficult to mechanize large swathes of the platinum belt but where it is possible, investors are keen because it could make for a smaller, more skilled labor force and potentially much better working conditions.

The study's focus is a scenario where the concentrator would process 8 million tonnes of ore per year by 2024, but it could start up with capacity of 4 million tonnes per year by 2020. A third phase could ramp up capacity to 12 million tonnes by 2028.

Cash costs would be about $341 per ounce of platinum, palladium, rhodium and gold, thanks in part to the revenue that could come from nickel and copper by-products.

The estimated project life is 36 years, according to the study, with the mill starting up after six years of pre-production.

Shares rose 4.6 percent in early trading on the Toronto Stock Exchange to C$1.82. (Reporting by Allison Martell in Toronto and Ed Stoddard in Johannesburg; Editing by Meredith Mazzilli)