news: everything on track , page-16

Yep, and this a timely article for Platinum Week in London beginning today. Little wonder we saw SLV bounce strongly Friday night...


Published on 14th May 2008 (http://www.miningweekly.com/article.php?a_id=133286)


Sylvania Seeks Ways to Spend ‘Mountain of Cash’, Targets 70,000oz by 2010 (By: Christy van der Merwe)

The biggest challenge for platinum-from-dumps producer Sylvania Resources, was how to spend the “mountain of cash” it had started generating, as the company reported a 34% increase in production to 4 802 oz platinum group metals (PGMs) in the March quarter, and looked set to produce 70 000 oz/y PGMs by 2010.

“This is quite atypical to any of the junior exploration companies, in that we are producing a mountain of cash flow in the beginning part of our life, instead of coming back to the shareholders for more cash to drill another hole. And really, the challenge we have now, and it is a great challenge, is how to spend our cash flow,” enthused Sylvania non-executive chairperson Richard Rossiter.

The ASX- and AIM-listed company boasted a margin of 84%, and its pre-tax profit at March 2008 was up 146% quarter on-quarter to R56-million.

Its market capitalisation is currently close to R5 billion, despite taking a sub-prime knock along with equity in general.

Sylvania CEO Terry McConnachie believed that Sylvania could get its margins up to 88%, and lower its production costs to R2 500/oz PGM, from its current level of R2 875/oz PGM.

Another target the company had set for itself was to improve recovery by 15%, which would push its recovery rates up to 61%.

It is also keen on, at some stage, listing on the JSE.

Commenting on the “meteoric rise” of the company, McConnachie explained that, from its start-up two years ago to today, the company had gone from incurring a loss at a stage when processing plants were being constructed, to a platinum-producing, profit-making operation that was heading for a purple patch in 2010 when it would begin producing at a rate of 70 000 oz/y.

McConnachie, who had great success in launching SA Chrome Merafe, said the 70 000 oz/y level would be maintained for ten years as the company entered hard-rock mining at opencast depths not exceeding 200m.

The secrets of success were targeting chrome tailings rather than platinum tailings, mostly on behalf of Samancor dump operations in the ‘heart of PGM country' - the Bushveld Igneous Complex.

The grades achieved from chrome tailings were higher than from platinum tailings. The chrome tailings produced about 2,6 g/t PGMs, compared with an average of 0,7 g/t to 1 g/t usually produced from platinum dumps.

The additional sweetener in the deal for Sylvania was the rhodium it carried in its basket. “Our basket price is quite a lot higher than the conventional platinum basket price, and that is because our rhodium is coming in at 15%, whereas traditionally you would have about 5% to 7% rhodium in most of the conventional platinum mines,” said McConnachie.

Rhodium was, in fact, contributing 51% to the company’s revenue.

GROWTH TO 2010 AND BEYOND

The company had an aggressive growth focus, and would put an emphasis on improved recoveries from existing operations, namely the Samancor dump operations, with the Millsell, Steelpoort, Lannex, and Mooinooi plants, as well as looking to acquire more tailings.

It maintained its stake in Great Australian Resources, which would act as its exploration arm, looking into near surface resources for potential open pit mining.

Sylvania was exercising an option to acquire 100% of the Vygenhoek tailings at Everest North, and was also negotiating a possible exchange with Aquarius Platinum South Africa for a PGM, chrome recovery joint-venture (JV) from Aquarius’ tailing streams at Everest North.

Should no agreement transpire between Aquarius and Sylvania, Sylvania would develop the mine itself. The concept was a one-million tons a year combined operation. The inclusion of the Everest North operation would likely lift the company to a 70 000 oz/y beyond 2010, and on to 2017.

In addition to that, the company would look to grow through consolidation, mergers and acquisitions, as well as possible smelting opportunities, and JVs and off-takes.

LOCAL LISTING

Although Sylvania was a well-funded company with robust cash flows, there were strong incentives to list on the JSE – particularly for the company’s black economic empowerment investors, Ehlobo Metals, which was headed by former Trade and Industry DG Alistair Ruiters.

McConnachie stated that there was a focus on making the company a “more South Africanised operation”, even though it was controlled from London and Sydney.

South African fund managers had shown keen interest in backing the company should it decide to list on the JSE.

There was the potential to list a combined entity, should the company enter into a JV with another junior miner, as funds could be raised to build a mine.

“We will be working hard to do a listing in Johannesburg - but I cant put a date to it,” McConnachie confided.