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Platinum Division

ARM Platinum

Review of operations

PDF iconARM Platinum (PDF - 439KB)


About ARM Platinum

ARM Platinum’s interests comprise:

ARM Platinum manages Two Rivers and participates in the management of Modikwa and Nkomati through their joint managing committees.

The division has a 90 percent interest in the Kalplats PGM Project, where exploration is undertaken in conjunction with Platinum Australia.

Enlarge ARM Platinum map Enlarge map
ARM PLATINUM AT A GLANCE
Operation ARM interest and JV partner Steady-state, ramp-up or exploration/ project Production in FY2006 At steady-state Life of mine (years)
Production Financial year
Modikwa 50% ARM
50% Anglo Platinum
Ramp-up 293 313 oz PGMs 350 000 oz PGMs 2007 30 years on the UG2 orebody
Two Rivers 55% ARM
45% Implats
Ramp-up n/a 220 000 oz PGMs 2008 20 years on the UG2 orebody
Nkomati Extension 50% ARM
50% LionOre
Steady-state 5 616 t Ni
3 398 t Cu
49 437 oz PGMs
5 000 t Ni
n/a
n/a
  10 years without large scale expansion released
Nkomati Large
Scale Expansion
50% ARM
50% LionOre
Project n/a 21 500 t Ni
12 000 t Cu
130 000 PGMs
2010 20
Nkomati Chrome 50% ARM
50% LionOre
Ramp-up n/a 720 000 tpa 2007 5
Kalplats PGM Project 90% ARM
(earn in to 49% by Platinum Australia)
Exploration n/a n/a n/a n/a

PGMs and nickel market

The overriding feature of the PGMs market in the past year has been the surge in the prices of the metals. The platinum price touched an all-time high in May of $1 335 per ounce and was, at year-end, still trading at levels well in excess of $1 200 an ounce compared with around $870 an ounce a year ago. The prices of palladium, and especially rhodium, reached levels not seen in many years. Platinum demand for jewellery has declined in reaction to the high prices, but was more than countered by continued increases in demand from the automotive sector. In Europe, emission regulations are becoming ever more stringent resulting in strong demand from the autocatalyst sector, and the sustained growth in sales of light diesel vehicles. Demand for palladium is being boosted by increased demand from jewellery manufacturers, especially in China, although above-ground supplies of the metal, particularly in China, could limit the upside potential for palladium. During the year rhodium prices surged dramatically reaching levels of over $6 200 per ounce. The rhodium market has been driven largely by demand from the autocatalyst sector, supported also by growth in the glass manufacturing industry as demand for liquid crystal display (LCD) and flat-screen glass increases. This demand is likely to persist into the 2007 financial year, with a positive impact on revenues, as rhodium makes up some 10 percent of ARM Platinum's basket of PGMs.

Nickel prices peaked on 31 May at approximately $32 000 per tonne and have risen by 121 percent from January to July 2006. The increase in the price has resulted in nickel becoming an increasingly important by-product of PGM producers. The strong price is being supported by supply constraints, with ongoing supply difficulties in Australia and Indonesia and an accelerating drawdown on London Metal Exchange stocks. There has been continued strength in demand from the stainless steel industry, from European stainless steel mills which are struggling to meet orders, and renewed purchasing in China. The strong demand for nickel, in both stainless and non-stainless steel applications, continues to support prices.

Review of the year

ARM Platinum continued its aggressive growth programme during the year. In total the division reported 171 374 ounces of PGMs and 2 808 tonnes of nickel attributable to ARM. Following the disposal of the 50 percent stake in Nkomati to LionOre in May 2005, nickel tonnes attributable to ARM have declined, although this is expected to increase once the Nkomati expansion project comes on stream.

Both Modikwa and Nkomati improved their contribution to the group as a result of increased production. Significantly, these production increases coincided with the uptrend in PGM and base metal prices, particularly in the second half of the financial year, adding to the improvement in profitability.

The division’s attributable earnings rose from R120 million ($17 million) in FY2005 to R227 million ($32 million) in FY2006, despite the reduction in the shareholding in Nkomati.

The Platinum Division is a key component of ARM’s growth programme, and good progress was made on objectives during the year.

ARM Platinum
capital expenditure (FY2006)
(100 percent basis)
ARM Platinum capital expenditure (FY2006)

Outlook and growth

Production from Nkomati is expected to be maintained at current levels, while Modikwa is expected to reach steady-state production of some 350,000 ounces of PGMs (160,000 ounces of platinum) during FY2007, with the first production from Two Rivers – at about 120,000 ounces of PGMs (61,000 ounces of platinum) – planned for FY2007.

Nkomati will continue to operate as one of the lowest cost nickel producers in the world. Costs at Modikwa should stabilise as productivity improves and the rate of development decreases. Two Rivers, planned as a low cost producer, will lower the average cost of production per platinum ounce as it rapidly builds up to full production, and is expected to make a significant contribution in the 2007 financial year.

The next year will see the final capital expenditure in building Two Rivers as well as costs associated with feasibility work, the 100 000 tonnes per month plant at Nkomati, and the Modikwa extension.

The project pipeline in the platinum division is focused on expanding Nkomati during the next five years, sustaining production at Modikwa, with the possibility of expanding the operation and also to evaluate the feasibility of Kalplats.

With Modikwa reaching full production and Two Rivers coming into production, together with the contribution from Nkomati, the division is now able to exploit the positive resource price environment. In addition, these operations also have quality, long-life orebodies with the potential to increase production into the future. Refer to the section on Reserves and Resources on page 55 for further information.

Growth in attributable PGM ounces (000 oz)
Enlarge Growth in attributable PGM ounces (000 oz) Enlarge graph

More detailed information is available in the ARM Platinum (PDF 439KB) section of the annual report.

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® 2006 African Rainbow Minerals Limited