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South African government takes big step into platinum mining

South Africa’s smaller platinum players have long bemoaned the fact that they are hamstrung by the world’s two largest producers.

REUTERS/REUTERS

South Africa's government will invest $420-million (U.S.) into a public-private platinum venture with Pallinghurst Resources Ltd. that has ambitions to become the world's third-largest producer of the precious metal.

The partnership, which includes the local Bakgatla Ba Kgafela tribe, has a production target of 1.1 million ounces within the next five years. That would make it the biggest producer behind Anglo American Platinum and Impala Platinum.

Pallinghurst chairman Brian Gilbertson, a South African miner who made a name for himself at global giant BHP Billiton, said the new company's mines were open-cast and shallow operations that would last at least 30 years.

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Other platinum mines in South Africa, home to 80 per cent of world supplies, are getting deeper and more expensive, leading to a levelling off of their output. Deeper mines are also more dangerous.

"In an industry where supply is going to be challenged and demand is going to be strong, getting into this opportunity and bringing about the consolidation that we have worked on for four years, is a significant step forward," Mr. Gilbertson said.

A statement said the investment, which includes $420-million from the government's Industrial Development Corporation, would create 9,000 direct jobs – a big boost for the ruling African National Congress' (ANC) fight against 24-per-cent unemployment.

The new venture will also build a processing plant as part of a wider push to increase mining "value-add," rather than simply digging up and exporting ore.

Mr. Gilbertson said the processing plant would focus on a new technology called the Kell Process, which cuts out the smelting step completely, taking a weight off the shoulders of South Africa's chronically strained power supplies.

"On the basis of work done so far it is very energy efficient – reducing the energy requirement by 80 per cent in a situation where electricity costs are rising and electricity is constrained," he said.

South Africa's smaller platinum players have long bemoaned the fact that they are hamstrung by the world's two largest producers because they are forced to sell their concentrate to their smelters.

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Their metal is then also often marketed and sold by these majors.

The IDC and Pallinghurst said the company should be set up by June, and work would begin on its first plant in 12 to 18 months.

They also expect to take the company public through a dual listing in Johannesburg and either London or Hong Kong in the coming year.

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