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NAV Per Share: ZAc 661 (as at 31 December 2016)

Platinum Group Metals


Sedibelo’s strategy of avoiding debt has proven successful and it remains unleveraged with significant net cash on its balance sheet at the year end.

For more information on Sedibelo Platinum Mines, please visit: www.sedibeloplatinum.com

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Record Production Levels

Sedibelo Platinum Mines achieved a record level of production with the lowest per ounce cost since its start of production in 2009.

Sedibelo Safety

Sedibelo Platinum Mines recorded more than 3.7million fatality-free shifts.

Investment Strategy

At its launch in 2007, Pallinghurst identified the platinum group metals (“PGM” or “PGMs”) industry as having attractive long term investment fundamentals. PGMs remain essential to a wide range of industries and do not have any substitutes in their main applications, particularly in automotive catalytic converters. An estimated 20% of consumer products either contain PGMs or use them during the manufacturing process. Demand for PGMs is also driven by their use in high-end jewellery, investments in physical metals and Exchange Traded Funds. Strong demand for PGMs is expected as the global population grows, economies expand and the consuming middle class in emerging markets increases. Given their key application in cleaning exhaust fumes from fossil fueled engines and their essential role in fuel-cells, the success of PGMs are directly linked to a desire for a cleaner and healthier existence.

As has been pointed out many times before, the supply of PGMs is constrained. The Bushveld Complex (“BC”), north of Johannesburg, South Africa, contains approximately 80% of the world’s known PGM resources and accounts for over 80% of the world’s annual output. Significant safety, operating cost and capital expenditure challenges arise from the ever increasing depth of mining, given the operating constraints, and limited global occurrences of PGM bearing reefs, production is likely to remain flat in the near to medium-term. The diverse and solid demand dynamics, combined with ongoing supply pressures and high barriers to entry, should bring stronger future prices.

Investment History

Investment Launch

In 2007, Pallinghurst identified three shallow PGM deposits north of the Pilanesberg on the Western Limb of the BC which, while individually attractive, could benefit significantly from economies of scale and synergies if combined into a consolidated entity. Pallinghurst assembled a consortium of Pallinghurst Co-Investors, including the Group, to invest in this PGM strategy. The Bakgatla Ba Kgafela Tribe (the “Bakgatla”), which already held interests in the deposits, joined the consortium as its Black Economic Empowerment (“BEE”) partner.

Consolidation of PGM Assets

Over a period of six years, the Pallinghurst Co-Investors, including the Group, acquired the Pilanesberg Platinum Mine (“PPM”), Sedibelo and Magazynskraal, and in 2012, consolidated them into a single contiguous operation with shallow resources of approximately 70 million 4E PGM (platinum, palladium, rhodium and gold) ounces. Together with its other assets, Sedibelo Platinum Mines Limited (“Sedibelo Platinum Mines”, “Sedibelo” or “SPM”, formerly Platmin Limited) has a total resources base of some 100 million ounces, making one of the world’s significant PGM asset owners,which can extract its shallow resources in a safe and sustainable fashion.

IDC Investment

Following the consolidation, the Industrial Development Corporation (“IDC”) invested the Rand equivalent of US$400 million into the newly created Sedibelo Platinum Mines. These funds, together with an additional US$65 million invested by international investors, were used to develop the consolidated operations into a “PGM producer for the 21st Century”; its generally shallow orebodies offering safety and cost benefits.

Sedibelo Platinum Mines

One of the world’s significant PGM asset owners.

Prosperity

Record Production Levels

Kell Technology

Partnership With The Bakgatla

Investment In Local Community

During 2015, the PGM industry faced depressed metal prices and the consequent refinancing of highly leveraged balance sheets from a number of producers. Sedibelo’s strategy of avoiding debt has proven successful, and whilst it is not immune to those challenges, it remains unleveraged with in excess of US$82 million of net cash on its balance sheet at the year end.

Against this backdrop, Sedibelo achieved record production in 2015 with annual dispatches of almost 175,000 4E PGM ounces. Whilst management has been focused on cost containment, due to the depressed metal prices, Sedibelo is expected to record a loss for the year. Sedibelo continues to maintain its production profile with a firm focus on cost management and the delivery of profitable ounces.

Since the last reporting, Sedibelo has signed agreements with the IDC to partner with LifeZone Ltd in developing and implementing the “Kell technology”, an innovative hydrometallurgical alternative to the smelting of PGM concentrates. Kell is an environmentally friendly process, requiring only a small amount of electricity compared to traditional smelting, and has the potential to increase PGM recoveries. Testing has provided encouraging results with increased recoveries of not only 4E PGMs, but also base metals such as copper, cobalt and nickel.

Sedibelo’s existing open pit operations employ around 2,000 people, most of whom are from the North West Province, and many specifically from the local Bakgatla community. The expansion in the medium term of Sedibelo’s operations is expected to increase the number of sustainable jobs for the Bakgatla, and in turn become a catalyst for community development, providing lasting social benefits for the region. Of paramount importance, Sedibelo maintains a strong emphasis on worker safety, recently reaching 3.7 million fatality-free shifts.

Sedibelo maintains and develops local roads and water supplies, provides training and development programmes to improve mining related skills and also funds scholarships for local community members to attend full-time educational studies. This tangible commitment to, and involvement in, the local community is one of the cornerstones for the successful development of the PGM portfolio.

From The Directors

Outlook

As significant supply challenges continue for the PGM industry and demand has exceeded supply for the fifth consecutive year, many commentators are predicting stronger PGM prices in 2016. This has been supported by some price improvements in the first three months of 2016, with platinum prices exceeding US$1,000/ounce for the first time since October 2015.

Sedibelo, with its large, sustainable and relatively shallow resource base, is well-positioned to benefit from further price improvements and remains committed to undertake a public listing when market conditions are more favourable.