ca.news.yahoo.com
SouthernEra Finds Shine in Platinum
By Lesley Wroughton
TORONTO (Reuters) - Canada's SouthernEra Resources (Toronto:SUF.TO - news) made its name as a diamond operator, but is fast becoming a platinum group metals heavyweight that's active on the world's biggest platinum deposits in South Africa.
In an interview, Chief Executive Patrick Evans called it "an accident of geography" that the company diversified into platinum group metals (PGMs) -- platinum, palladium and rhodium.
For years the company was followed by the investment community as a diamond stock and joint-venture partner of industry giant De Beers in South Africa.
But that changed in 1999 when company founder Chris Jennings, who was part of the discovery of the big Diavik diamond mine in northern Canada near the Arctic Circle, bought a stake in Messina Limited that held nearby platinum properties.
At the time the move was billed as the first investment by a North American group in South Africa's platinum sector, the biggest in the world.
Messina owned the Messina Platinum Project, three mineral properties that extend 20 kilometers (12 miles) across a PGM-rich reef, about 300 kilometers northeast of Johannesburg.
SouthernEra has since been developing the properties and recently launched its first PGM mine, Voorspoed, which will produce 200,000 ounces in 2004 after a build-up of production.
Evans sees SouthernEra's PGM production reaching more than half a million ounces by 2006.
SUPPLY AGREEMENT
Voorspoed's production is already sewn up in a five-year supply agreement with a Detroit-based auto company. The pact is based on a floor price of $400 an ounce for platinum and $370 an ounce for palladium, and ceiling prices of $600 an ounce and $658 an ounce respectively.
Under pressure to reduce emissions from cars, auto manufacturers are increasingly using PGMs in autocatalysts to reduce pollution.
Evans said SouthernEra was now embarking on the next phase of expansion that involves the Doornvlei property next door to Voorspoed, where construction on a mine is expected to start next year.
Doornvlei's full production is expected to be reached in 2005 at 173,000 ounces of PGMs a year.
A third phase of expansion will come from its Dwaalkop property -- located between Voorspoed and Doornvlei -- that will be conducted with black economic empowerment partner Mvelaphanda Resources Ltd. (MVLJ.J).
This phase would add about 340,000 to 360,000 ounces of PGMs a year to SouthernEra's production, said Evans.
It also has had success on its Millennium property, located in the northeastern Mpumalanga province, which Evans believes will show resources of between 8 million to 10 million ounces.
The company has been listed in Toronto since 1988. It expanded to London's Alternative Investment Market (AIM) this year to broaden its institutional base among British funds, said Evans.
Since then, about 6 percent of its stock has migrated to the Britain, he added. In Toronto, its shares are up 115 percent this year, and closed at C$6 on Monday.
Evans said SouthernEra would retain its focus on both diamonds and platinum group metals even though it's an awkward mix for analysts.
Currently PGMs account for about 90 percent of the company's value, but Evans said that could easily change if it finds a big diamond deposit. SouthernEra is second after De Beers for spending on diamond exploration in South Africa, he added.
"We haven't experienced any negative reaction to our diamond exposure, although people who own us bought us because of PGMs, but it doesn't concern them that we have diamond interests as well," said Evans.
The company is 14.6 percent held by investment group Fidelity and London-based mining group Rio Tinto Plc (RIO.L) has a 13 percent stake.
It also has a stake in the Camafuca joint venture diamond project, with Israel's Leviev Group in northeastern Angola, which is expected to start production in 2003. And it has diamond and PGM exploration projects in Gabon, Australia and Canada.
($1=$1.56 Canadian)
(Reuters Toronto newsroom +416-941-8101, fax 416-869-3436 lesley.wroughton1@reuters.com) |
