Bloomberg News

Royal Bafokeng Studies $1.4 Billion Platinum-Mine Expansion

August 16, 2011

(Updates with closing share price in final paragraph.)

Aug. 16 (Bloomberg) -- Royal Bafokeng Platinum Ltd., a South African producer of the metal, is studying a possible 10 billion-rand ($1.4 billion) expansion at the Styldrift project in South Africa, seeking to boost output as prices rise.

“There is significant upside potential here,” Chief Operating Officer Nico Muller told investors in Johannesburg today. The concept study, to be completed in December, will assess the “high-level business case” for the plan, he said.

The proposed expansion, known as Styldrift II, follows an increase in demand for platinum, used in jewelry and to curb pollution from cars. Prices gained 19 percent in the past 12 months to $1,818.75 an ounce as of 4:24 p.m. in London today. South Africa produces more than three-quarters of global supply.

RBPlat, as the Johannesburg-based company is known, will probably produce about the same amount of platinum group metals this year as last, Chief Executive Officer Steve Phiri told investors. Demand is likely to exceed supply in the next three years, while a shortage of palladium, typically mined along with platinum, may rise to 1 million ounces in 2014, he said.

RBPlat is already developing the Styldrift I project northwest of Johannesburg for about 11.6 billion rand. The company’s platinum group metal output totaled 288,000 ounces last year and 142,100 ounces in the first half, it said today.

Profit Slides

Earnings fell to 1.05 rand a share in the first half from 1.32 rand a year earlier as costs rose. Labor, power and water bills are climbing faster than South Africa’s consumer prices, Muller said. The annual inflation rate was 5 percent in June.

A three-year wage deal has been reached with the National Union of Mineworkers, South Africa’s largest union, raising pay by as much as 10 percent this year, 8 percent next year and 9 percent the year after that, RBPlat said today.

The shares fell 21 cents, or 0.4 percent, to 55.39 rand at the 5 p.m. close in Johannesburg, extending their decline to 17 percent in the past six months. Anglo American Platinum Ltd., the largest producer of the metal, dropped 22 percent to 551.50 rand in the period.

--Editors: Amanda Jordan, Tony Barrett

To contact the reporter on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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