· 2,000 Tones To be Crushed Prior To Commissioning Of Milling Section
· Run-Of-Mine Stockpile Showing Higher Grade Than Expected
· Operating Margin Of US$350/oz At Current PGM Prices
· Expected To Be One Of Lowest Cost PGM Producers In Industry

Platinum Australia (AIM: PLAA; ASX: PLA) says that first rock was fed to the crushing section of the processing plant at its Smokey Hills platinum mine in South Africa at the end of last week. Initially, approximately 2,000t of ore and waste is being crushed and fed to the mill feed silo in preparation for the start of commissioning of the milling section of the plant.

Smokey Hills, located on the eastern rim of the Bushveld Complex, is the world’s newest platinum mine, and plant commissioning marks PLA’s transition from and explorer/developer into a PGM producer. The company has already stockpiled around 80,000t of ore on the run-of-mine pad ready for commissioning of the whole processing plant.

PLA Managing Director John Lewins said: “The crushing section is performing well and we continue to progress with commissioning the remainder of the plant. We are particularly pleased that sampling to date of the 80,000t ore stockpile is running at approximately 7.5g/t 4E PGM*, some 10p.c. above the anticipated grade. The lack of low grade material means we are having to mix waste rock with run-of-mine ore for the commissioning period in order to reduce the head grade of feed to the processing plant. This is, however, an issue that we are more than happy to have.”

The current ore stockpile will be built up to over 200,000t by May next year and this will ensure continuity of ore supply to the processing plant whilst the underground mine, now under development, builds up to its full planned production rate of 60,000t/month over the next 12-18 months.

The company has previously indicated that Smokey Hills will be amongst the lowest cost PGM producers in the industry, and the recent fall in the Rand:US Dollar exchange rate has enhanced this position.

Mr Lewins commented: “It has reduced our projected average on-site production cost to less than US$200/oz 4E PGM (net of credits), giving a total cost, including smelting and refining charges, of approximately US$300/oz 4E PGM. This provides a margin of over US$300/oz 4E PGM at the current extremely depressed metal prices (platinum US$800/oz, palladium US$180/oz and rhodium US$1,800/oz) and, given our current level of hedging, this margin increases to approximately US$350/oz 4E PGM.”

“A further effect of the fall in the Rand is that, since all the debt component of our funding for Smokey Hills was provided in Rand, this has significantly reduced the debt in terms of US Dollars”.

Smokey Hills Project

Initially, Smokey Hills is exploiting the UG2 resource by way of open cut mining but this will progress to a shallow underground mining operation during the first year. The on-site treatment plant has a design capacity of 720,000t/year and it will produce approximately 95,000oz/y 4E PGM contained in a flotation concentrate. This will be delivered to Impala Refining Services under a life of mine offtake agreement.

PLA has a direct 69.75 p.c. interest in Smokey Hills, with the balance held by various Black Economic Empowerment (BEE) entities. However, because of the nature of the transactions whereby PLA provided vendor finance for the BEE acquisition based on the value of the project established by the bankable feasibility study (BFS), PLA expects to retain approximately 85p.c. of cash flow over the life of the project.

The initial capital cost of Smokey Hills was estimated in the July 2006 BFS to be US$40m. This, plus an overrun facility, gave a total cost of up to US$49m of which US$11m in equity has already been contributed. The balance of up to US$40m is being provided by Standard Bank of South Africa as debt funding. PLA has spent a further US$2.5m to install 8 MVA of standby generating capacity which will allow both mine and processing plant to operate at full capacity independently of Eskom grid power in the event of any supply problems.
* Platinum, palladium, rhodium and gold – Press Release