Eastern Platinum - profitable producer, hidden gem (ELR)

OVERVIEW:

AIM and TSX dually-listed Eastern Platinum, otherwise known as Eastplats, is in production and making an (operating) profit. In the last two years it has developed from a tiny company with a single interesting exploration project on the Eastern Bushveld to one which boasts 4 significant projects, including a healthy mine on the Western Bushveld, and three projects in the East (2 contiguous) with established resources and feasibility studies in progress.

What really transformed Eastplats was its acquisition of 69% of Barplats in early May 2006, hence instantly gaining annualised production of 100,000oz PGMs. Ian Rozier (CEO) gained this for under $7/oz in the ground. However, that fails to include $350m worth of infrastructure on the Western Limb e.g. the 160,000 tpm processing plant and 80,000 tpm dense medium separation (DMS) plant, and $300m worth of shafts on the Eastern Limb. It also gained an experienced Board and operating personnel. Essentially, these assets were obtained for nothing.

Top priority remains targeted investment and rapid gearing up of operations at the Crocodile River Mine (CRM). Initial investments are already paying off with a tidy operating profit of CAD7.4m in the Oct-Dec 06 quarter (maiden profit July-Sept 06).

ELR now boasts a mere 87m oz of PGM under its control (N.B. Black Empowerment interests own some of it). Speaking of Black Empowerment, ELR appears to have solid agreements with three different groups. As a result, New Order rights are sorted.

Progress since the Barplats acquisition has been impressively swift. A bid has been tabled to mop up the remainder of Barplats, then list on JSE (i.e. it will be tri-listed). Investment on CRM has accelerated mine development to positive cashflow. Perhaps the best thing about Eastern Platinum is that it seems to be consistently delivering its promises on time, or even ahead of schedule.

EASTERN PLATINUM PROPERTIES:

CROCODILE RIVER MINE (CRM):
Western Bushveld. 69% Eastplats, 26% BE group, 5% other. Mining UG2 reef. All-category resource = 12.7m oz 3PGE & Au. Tenements at Crocodile River are named

• Zandfontein East (producing). New conveyor system installed and DMS plant being upgraded from 80 to 160tpm
• Maroelabult West and North (early production)
• Crocette & Crocette2. Currently under development with view to production H2-07.
• Kareespruit. Infill drilling underway to upgrade resource from inferred to indicated.

CRM was loss making until the first part of 2006. Barplats were encumbered with debt (already retired by ELR) and were unable to find funds to refurbish or develop the mine, hence the reason the 69% acquisition succeeded. Producing at rate of 22,666oz in Q1 06 (Jul 1-Sept 30) but ramp-up of operations is in progress. Basket price per oz = $1,082 (6PGE). Off-take agreements for concentrate are in place for life-of-mine (at least 20 years) with Impala Platinum, which takes roughly 16% for smelting.

KENNEDY'S VALE (development project):
Eastern Bushveld. An original Barplats property. The importance of the KV acquisition is that is contiguous with Eastplat's own Spitzkop development project, which at a stroke transforms the prospects of viable development of both properties. The synergy is that while Spitzkop has a rich near-surface resource which can be rapidly exploited to produce cashflow, it is much smaller and might not justify development on its own. KV vale however is huge, but deeper. That KV comes with two existing shafts to access deeper levels is an added benefit as these can also be used to access the deeper levels of reef in Spitzkop (far less expensive than driving new vertical shafts). See comments on Spitzkop as below.

All three – Kennedy’s Vale, Spitzkop and Mareesburg – have their main mineralisation in the UG2 reef. As a rule, the UG2 reef is less platinum and rhodium rich than the Merensky reef, but here, the situation is reversed, to Eastplats’ benefit.

KV resource = 40.4m oz 5PGE & Au, all in measured and indicated categories (65% measured), average grade 5.65g/t 5PGE & Au. New order prospecting rights granted. Drilling at KV is underway. Along with Spitzkop, can potentially be combined into a single (more cost-effective) project; an integrated full feasibility study is underway and expected to report Q3 2007.

SPITZKOP (development project):
Eastern Bushveld. ELR owns 87%. New order prospecting rights granted, full feasibility study expected Q3 2007. Up-dip from Kennedy’s Vale, i.e. nearer surface, and houses stunning average grades of 7.7g/t 5PGE & Au. The resource is 9.3m oz in UG2 and 3.7m oz in Merensky. For further comments, see Kennedy’s Vale above.

MAREESBURG (development project):
Eastern limb, not far from Spitzkop and Mareesburg. 2 million oz PGM resource (75% Measured), average grade 5.4g/t 3 PGE & Au, of which 75.5% is attributable to Eastplats. Full feasibility study should report by the end of 2006 but start-up costs are expected to be low as the UG2 reef outcrops at Mareesburg and much of the resource is open pittable. Mareesburg boasts good access, available power and labour. It is contiguous with Aquarius' Everest North & Angloplats' De Brochen projects. Also worth noting is the information-sharing agreement with Sylvania Resources who own the other side of the hill from Mareesburg. According to Sylvania, a formal JV is under negotiation.

FINANCE & FUNDAMENTALS:
SHARES OUTSTANDING: 516,228,821
WARRANTS AND OPTIONS:105,179,374
WARRANT PRICES can be found on the website here but the great majority are exercisable at upwards of C$1.80
CASH said to be $70m in early November 06. An extra $195m would accrue if warrants are taken up.
DEBT: NIL


ARTICLES & BACKGROUND INFO:
• Link to old thread
• Who owns what on the Bushveld
• Company website
• Who owns what on the Bushveld
• Maps of PGM company territories
• Barplats presentations
• Late 2005 Minesite presentation
• Last Minesite article 20 July 06
• 31 Oct 2006 Dubai Conference presentation (see 6.10pm)
• AIM admission document

COMMODITY CHARTS:

MAPS:



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