THE chances of a major, independent nickel and platinum group metals (pgm) smelter being built in South Africa have improved following developments at Ridge Mining’s Sheba’s Ridge project.

Ridge announced last week that, together with its partner the Industrial Development Corporation (IDC), it is in “advanced discussions” with Impala Platinum (Implats) and African Rainbow Minerals (ARM) to form a joint venture to undertake a bankable feasibility study (BFS) into an independent smelter.

Should it all work out then a smelter could be built using Implats’ technology to treat more than 1Mt/year of nickel and pgm concentrates from the Sheba’s Ridge nickel/pgm project and ARM’s Nkomati nickel/pgm mine which is being expanded.

Such a smelter could also treat concentrates from various platinum junior companies starting up projects on the Eastern Limb of the Bushveld Complex.

Ridge is the “minnow” in this grouping but it has just completed the feasibility study on Sheba’s Ridge in which the IDC is a 26% shareholder.

According to Ridge CEO Terence Wilkinson, Sheba’s Ridge will produce some 600,000t of concentrate annually from which the final refined metal production will be 23,000t of nickel, 11,000t of copper and 352,000oz of pgm (4PGE).

The figures have been confirmed through an independent technical audit by SRK Consulting UK. The feasibility study confirmed Sheba’s Ridge has an ore reserve containing 740,000t (1,6bn lbs) of nickel; 290,000t (630m lbs) of copper and 10.7m oz of pgm.

There is not enough smelting capacity available in South Africa to process the estimated annual throughput of 600,000t of concentrate which is why Ridge has to look at building its own smelter.

According to the statement released to AIM by Ridge, “the objective of the feasibility study will be to examine the costs and ownership of a larger smelting facility which could take in concentrate feed from other mines on the Eastern Bushveld rather than one dedicated purely to Sheba’s Ridge, thereby benefiting from economies of scale.”

ARM’s plans are to increase nickel production from its Nkomati mine to some 20,500t/year by 2011 from the current level of around 5,500t/year. Estimates are that Nkomati will produce some 400,000t/year of concentrates when running at full production.

Nkomati is a 50/50 JV with Norilsk Nickel and ARM’s plans are currently to have that material toll-treated.

ARM executive director Stompie Shiels commented, “our strategy is to develop further into the beneficiation of our products which is difficult and not something we think we can do on our own.

“We have a good relationship with Impala and we are in discussions looking at ways of developing a smelting facility. It is still very early days and we have still to finalise a JV on agreement on commercial terms.”

Wilkinson said it was too early to comment on the likely size and cost of the smelter now under consideration.

He also pointed to Eskom’s power situation as a key issue that could affect the development. He commented that Sheba’s Ridge was in the queue of projects looking for power to be allocated to it by Eskom.

Ridge has brought in consultants Pace Global Energy Services to look at alternatives through which Ridge can reduce its reliance on grid power supply from Eskom.

Wilkinson commented, “but the smelter associated with the mine development would be a huge consumer of power. Assuming we are totally reliant on Eskom for that power then it is likely to be around 2013 before the smelter could be up and running.”

He added, “I believe the involvement of heavyweights like the IDC, Impala Platinum and ARM means we stand a fighting chance on making this happen.”

Ridge is currently bringing its first project, Blue Ridge, on stream with production due to start in the fourth quarter of this year.

According to a research report from RBC Capital Markets, "RBC views the involvement of Implats (in particular) and ARM as very reassuring. Both could potentially contribute feed and RBC believes Implats is likely to provide technical input as well." – Miningmx.com