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Mining legend Friedland makes case for platinum at gold forum

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Robert Friedland

Photo by Duane Daws

15th September 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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DENVER, Colorado (miningweekly.com) – Billionaire mining legend Robert Friedland on Monday made the case for platinum at the Denver Gold Forum, saying that while he was a known gold bear, platinum was the only precious metal that had disruptive medium-term demand dynamics in the cards, boding well for pricing upside.

“It is critical that investors gain exposure to platinum, as this is where the disruptive medium-term catalyst is that would drive prices up,” he told delegates attending the forum.

Friedland, who is chairperson of Ivanhoe Mines, founded his bullish platinum scenario on the hazards that air pollution caused through automotive emissions and the burning of fossil fuels in urban spaces, pointing to London as being the recent European Union leader in air pollution and Paris as having earlier this summer placed public transport restrictions on its citizens to combat high pollution levels.

The World Health Organisation had also declared that urban air pollution was the number one public health risk, owing to the increased incidences of respiratory diseases.

And globally, air pollution was only set to get worse.

For instance, China currently had about 90-million private passenger vehicles on its roads, but the government was expecting this to rise to more than 400-million by 2030.

“The future lies in electric vehicles (EVs), and especially in hydrogen fuel cells,” Friedland stated, pointing to Japanese automaker Honda as being the near-term catalyst that would spark disruptive demand trends for platinum.

Honda plans to introduce the first commercial hydrogen fuel cell-powered vehicle in February next year. “Honda is about to unleash a revolution,” he declared.

Friedland said the progressive auto industry was presently debating whether to go down the Elon Musk EV route, or whether to embrace hydrogen fuel cells, noting that whichever way the global auto industry eventually preferred, it would bode well for Ivanhoe Mines' Platreef flagship, in South Africa. He also said that, as more US states were legislating for more emissions-free vehicles, there would eventually come a tipping point in the auto industry, when traditional automakers would also adopt EV or hydrogen fuel cells to drive their vehicles.

Other demand drivers were also boding well for platinum prices. The intensifying global trend of urbanisation was a critical driver behind the potential impending switch to hydrogen fuel cell-powered vehicles.

“With Japan being on board, we stand on the verge of something serious. Hydrogen fuel cells constitute a new and fundamental use for platinum, which bodes incredibly well for South Africa, owing to it supplying about 79% of the world’s platinum,” he said.

A stack of fuel cells for one automobile in general contains about 30 g of platinum, about eight to ten times the amount currently used in catalytic converters on conventional internal combustion-powered automobiles.

Countries around the globe, especially in the East, were also increasingly keen to tighten legislation to remove sulphur from fuel, opening up the auto market to the increased use of catalytic converters, which rely on platinum-group metals to clean emissions.

Other technologies, such as the escalating implementation of superfast magnetic-levitation trains, especially in Japan and the manufacture of photovoltaic panels would also need significant quantities of the white metal.

‘THINKING PERSON’S MINE’

Friedland pointed out that Platreef had several attributes in Ivanhoe's favour. Some of the positives included the fact that the deposit was flat, thick and high grade, that the mine could be fully mechanised, and that the deposit held five metals.

“Platreef is the thinking person’s platinum mine. It will be the largest platinum mine in the world, and at $341/oz, would be the lowest-cost producer globally.

“We will supply the platinum-fuelled hydrogen fuel cell revolution coming soon to a ‘theatre near you’,” he said.

He added that when the mechanised operation was running at capacity, and aided by the weakening South African rand, Platreef would likely change the traditional platinum-mining industry, making traditional labour-intensive mines obsolete.

The mining legend, known for his pivotal role in the discovery of megadeposits such as Kinross’ Fort Knox mine, in Alaska, Vale’s Voisey’s Bay mine, in Newfoundland and Labrador, and Rio Tinto’s Oyu Tolgoi mine, in Mongolia, said the same team that had worked on these projects were now focused on Platreef.

The Platreef project, on the northern limb of the Bushveld Igneous Complex, in Limpopo, involves the development and construction of a highly mechanised underground mine to access the underground Flatreef discovery. Ivanhoe has started the sinking of Shaft No 1 to obtain a mineralised bulk sample to complete the development assessment of the Flatreef.

The Flatreef mineral resource, with a strike length of 6 km, predominantly lies within a flat to gently-dipping portion of the Platreef mineralised belt at relatively shallow depths of about 700 m to 1 100 m below surface.

A preliminary economic assessment recommended a phased approach to the development of a large, mechanised, underground mine. Ivanhoe's plan for the project entailed three phases of potential development for an underground mine and the concentrator processing facility. The first phase comprises a four-million-tonne-a-year mine and concentrator; the second phase an eight-million-tonne-a-year mine and concentrator (base case); and Phase 3 contemplated a 12-million-tonne-a-year mine and concentrator.

The base case scenario was targeting 785 000 oz/y of platinum, palladium, rhodium and gold output, with significant amounts of copper and nickel by-product. Friedland noted that should EV gain traction in coming years, copper was still a significant component of lithium-ion batteries, making up about 70% of the batteries’ weight.

Platreef’s development phases would be implemented depending on market demand, smelting and refining capacity and capital availability. It could even consider an expansion beyond the third phase, subject to further study.

The base case scenario was targeting an estimated preproduction capital requirement of about $1.7-billion, including $381-million in contingencies.

Ivanhoe had finalised a broad-based black economic-empowerment (BBBEE) deal, giving 20 local communities a 26% interest in the project.

The deal paved the way for South Africa's Department of Mineral Resources to formalise and execute the mining right granted to Ivanhoe in May.

Friedland said that about 150 000 people live in the 20 host communities that form part of the groundbreaking BBBEE transaction. A total of 187 local entrepreneurial companies, representing a combined 333 individual shareholders, participated in the entrepreneurial subscription.

Upon execution of the mining right, a community trust for the 20 host communities will receive a yearly fixed contribution of R11-million (about C$1.1-million) while the mine was being developed.

Friedland said the BBBEE ownership stake was a landmark for the Platreef project, demonstrating Ivanhoe's commitment to the empowerment of black, historically disadvantaged South Africans.

The Platreef project was on target for initial underground development in 2018 and concentrator startup in the fourth quarter of 2019.

Edited by Creamer Media Reporter

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