Construction of world's largest platinum mine back on track

Building in Limpopo of the world's largest platinum mine is set to resume after Canada-listed mining house Ivanhoe won a court victory this week letting it go ahead with the moving of ancestral graves.

The High Court in Pretoria last week gave the go-ahead for recommencement of the sinking of the shaft.

Robert Friedland, chairman of the Canada-listed company, has been trying to establish the $1.7-billion (about R22-billion) mine for the past three years, but ran into opposition from local communities, which accused the mining company of human rights violations.

Community leaders said the mine infringed on their rights because ancestral graves in the vicinity of the project would have to be removed.

Community members were granted an interim interdict in November to halt the project.

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Patricia Makhesha, MD of Ivanplats, a subsidiary of the Canadian company, said the company was in a position to develop what would become a large and profitable platinum mine, co-owned by the local historically disadvantaged community and international investors.

Makhesha denounced the court action as "an ill-conceived attempt by a few individuals" to stop the construction of the mine.

The project "represents one of the most significant direct foreign investments into the South African economy in recent years and constitutes an asset which will yield very significant benefits to the economy in general and the economy of Mokopane and Limpopo in particular", said Makhesha.

The green light comes at a time of mounting fear of a platinum deficit in the market, although this talk has not fed into the price of the metal yet.

Platinum underperformed gold over the past couple of years, falling about 13% while the gold price has climbed nearly 4%.

The platinum industry remains in trouble with major mining companies having dropped 55% over the past two years.

Anglo American, the world's biggest mining house, has disposed of its labour-intensive platinum assets in Rustenburg, citing difficulties in doing business in South Africa.

These notably include a January 2014 strike and the rising electricity charges.

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The deficit question is slowly changing the view of the sector as well as strong growth in some developed markets.

Makwe Masilela, an analyst at BP Bernstein, said it would be wise for Ivanplats to invest in a new mine right now.

There was "improvement as there's some pockets of growth - like Britain's GDP was better than expected while Germany's purchasing managers' index and that of the eurozone is improving".

Labour issues were a global problem, said Masilela, citing a recent strike by workers at Chilean copper mines.

"Electricity is usually the second-largest expense for miners after labour, but with alternative energy getting into full steam in South Africa that will help to reduce costs.

"The disadvantage will always be if they fail to produce in a cost-effective way and if commodity prices start falling again," Masilela said.

An analyst who did not want to be named said Ivanplats did have some financing in place and shaft sinking had commenced.