VANCOUVER — Robert Friedland’s Ivanhoe Mines (TSX: IVN; US-OTC: IVPAF) is sitting on an impressive platinum group metals (PGM) resource at its Platreef property, situated 280 km northeast of Johannesburg, South Africa,. And the project’s scale keeps growing, even as the company advances towards a production target of 2020.
On March 26 Ivanhoe tabled a preliminary economic assessment (PEA) of Platreef after having announced a week earlier that its drills had unearthed more potential resource at the project’s Ga-Madiba extension zone.
The company had been contemplating a 12-million-tonne-per-year operation, but in its PEA settled on a base-case 8-million-tonne-per-year scenario that would be built in two phases.
Platreef sits on the northern limb of South Africa’s prolific Bushveld igneous complex, It hosts 214 million indicated tonnes grading 4.1 grams platinum, palladium, gold and rhodium (4PE) per tonne, 0.34% nickel and 0.17% copper, as well as 415 inferred tonnes averaging 3.5 grams 4PE, 0.33% nickel and 0.16% copper.
Combined, the indicated and inferred resources cover 6 km of strike along the Flatreef deposit. The resource calculations use a 2-gram 4PE cut-off grade.
A planned underground mine would have at least a 36-year project life, including a six-year pre-production period before mill start-up.
Phase one would include building a concentrator and associated infrastructure to support production capacity of 4 million tonnes per year by 2020.
Phase two would see a ramping-up to a plant capacity of 8 million tonnes per year by 2024. Phase three would achieve a 12-million-tonne-per-year capacity by 2028.
Development capital of US$1.5 billion would be needed for phase one, with US$1.7 billion earmarked for phase two, while the third phase would tack on another US$1.8 million.
Ivanhoe is sinking a 7.3-metre-diameter, 800-metre bulk sample shaft at Flatreef that will be completed during the first half of 2016.
The company has also filed an application for mining rights with South Africa’s Department of Mineral Resources, which would grant it a mining licence over an initial 30 years.
Ivanhoe’s PEA base case focuses on Platreef’s US$1.7-billion, second phase which would see annual production of 785,000 oz. 4PE, with cash costs pegged at US$341 per oz., net of by-product credits.
The proposal would carry a US$1.6-billion after-tax net present value (NPV) at an 8% discount rate, along with a 14.3% internal rate of return (IRR) and 6.4-year payback period.
The PEA assumes metal prices of US$1,700 per oz. platinum, US$820 per oz. palladium, US$1,300 per oz. gold, US$8.35 per lb. nickel, US$3 per lb. copper and US$1,700 per oz. rhodium.
Next Ivanhoe will complete a prefeasibility study of its US$1.5-billion first phase. In the PEA this phase features a US$897-million after-tax NPV at an 8% discount rate, along with a 5.6-year payback period.
It also intends to better analyze additional opportunities, including on-site smelters and base-metal refineries.
Meanwhile, Ivanhoe’s stepout drilling is showing Platreef’s expansion potential. The company’s Ga-Madiba target covers 3.7 sq. km adjoining and stretching south from the inferred resource, which in turn surrounds the indicated resources at the heart of Flatreef.
Drilling to date has intersected the established T1 and T2 mineralized reefs and confirmed Ivanhoe’s theory that Ga-Madiba represents the southern-strike extension of Flatreef, which runs over 6.5 km.
The company intends to cobble together an inferred resource at Ga-Madiba based on the 15 drill holes.
Results are highlighted by hole 400 on the eastern flank of the Flatreef extension, which cut 49 metres grading 4.63 grams platinum, palladium and gold (3PE), 0.3% nickel and 0.13% copper at a 1 gram 3PE cut-off grade. The intercept’s ratio of platinum to palladium is 1 to 1, with rhodium assays pending. The vertical intersection has a 34.4-metre true thickness when adjusted for dip.
Other drill intercepts include 17.4 metres averaging 2.89 grams 3PE, 0.26% nickel and 0.12% copper in hole 409; and 10 metres grading 2.98 grams 3PE, 0.27% nickel and 0.12% copper over 10 metres in hole 402.
Holes 400 and 409 were collared 3.5 km and 4.3 km south of the planned bulk-sample shaft at Flatreef. The high-grade mineralization in the T2 reef started at 967 metres deep and continued to 1,016 metres in 400, while the mineralized reef in hole 409 was intersected at a depth of 720 metres.
“The drill results are another highly encouraging development in the history of our discoveries at Platreef, confirming our continuing exploration priority and demonstrating more promising potential,” Friedland noted in the release. “We plan to aggressively drill the area in pursuit of our objective of infilling and expanding the new discovery area.”
As a result of its drilling Ivanhoe has updated Platreef’s overall resource expansion potential via Ga-Madiba and a secondary exploration target.
The company estimates that Ga-Madiba could contain between 115 million and 235 million tonnes grading 3.1 4PE, 0.23% nickel and 0.11% copper. The second target, which covers another 7.6 sq. km tract adjacent to existing resources, is estimated to host between 260 million and 450 million tonnes averaging 3.4 grams 4PE, 0.3% nickel and 0.15% copper.
The company points out that there are 37 sq. km of unexplored ground beyond the two exploration targets where the Platreef mineralization could lie. Eight drill rigs are operating at Platreef. In addition to Ga-Madiba, Ivanhoe is infill drilling to expand indicated resources in the initial planned mining area to support its production scenario.
BMO Capital Markets analyst Aleksandra Bukacheva — who has an “outperform” rating on Ivanhoe’s stock — called the results positive, but pointed out that Platreef’s value could be driven by social and economic milestones, rather than expanding resource volumes.
“Exploration results suggest a high probability of identifying additional mineralization at Platreef with a grade thickness profile similar to that of Flatreef, adjacent to the proposed development area,” Bukacheva wrote in a March 19 research report. “However, given the already significant [resource inventory], adding value to the Platreef discovery will be driven largely by development path de-risking.”
Ivanhoe reported US$172 million in working capital at the end of the third quarter, and has traded within a 52-week window of $1.45 and $2.70 per share.
Shares rose 6% after news of its Ga-Madiba results, en route to a $1.68-per-share close at press time. Ivanhoe has 571 million shares outstanding for a $960-million market capitalization.
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