Operational Review

 

Marula

 

Business summary

  • An on-reef decline (Driekop Shaft) and an off-reef conventional decline (Clapham Shaft)
  • Concentrator plant
  • Reserves: 1.2 million attributable ounces of platinum
  • Resources (including reserves) 7.6 million attributable ounces of platinum
  • Production: 70 600 ounces of platinum in concentrate
  • Employees and contractors: 4 209
  • Key sustainability issues: Safety, rightsizing operational profile

 

 

Material sustainability review

SAFETY

The overall safety performance was unsatisfactory. Notwithstanding the mine experiencing zero fatalities over the period, the number of lost-time injuries remains high with a marginal improvement of 2% from FY2010. Poor behaviour and a lack of compliance to safety rules were the key factors that contributed to these safety incidences. A DuPont STOP® programme that was initiated to address these issues and should yield positive results for safety in future.

The safety initiatives will focus largely on behavioural change, compliance to safety rules, leadership commitment and communication. The safety target is a 20% improvement on the LTIFR by FY2012 with a threshold of 7.

 

Operational review

Tonnes milled and headgrade were virtually unchanged at 1.54 million and 4.39g/t 6E, respectively, resulting in platinum production remaining constant at 70 600 ounces despite an increase in financial, labour and equipment resources. This was below our ramp-up plan of 85 000 platinum ounces. Higher staffing levels without the requisite improvement in production ounces resulted in a 19% rise in unit costs to R16 884 per platinum ounce (R6 419 per PGM ounce).

Marula has experienced a series of operational difficulties since FY2002 and has been unable to achieve its production targets. The original mine plan, based on a trackless mechanised bord and pillar mining method, proved inappropriate due to geological conditions, primarily the rolling nature of the reef which hampered mechanised machine efficiencies and aggravated the extent of waste dilution.

A new hybrid mine plan incorporating conventional stoping and mechanised strike development was developed in FY2004 and implemented the following year. This plan envisaged simultaneous infrastructure development for the conversion to conventional mining and ongoing stoping from the hybrid sections.

The conversion project fell behind schedule due to the fact that production parameters were premised on drill-jig technology and double-shift blasting.

In light of these operational difficulties, the mine plan was reassessed in FY2010. The review revealed that the complexities of changing to a conventional mining layout resulted in a number of logistical constraints and consequently the production target was amended to a steady-state level of 100 000 ounces of platinum per annum by FY2013.

Despite the initiatives put in place to address these constraints, Marula has continued to fall short against plan. A detailed strategic review undertaken during the last quarter of 2011 evaluated mine planning parameters and the project status. As a consequence production at Marula will be maintained at the current rate of 70 000 ounces of platinum per annum for the next two years to enable the completion of the conversion project. Marula is rightsizing its cost base to the current ounce profile, a process that has been successfully completed in July.

As part of the ongoing production profile, the Company was successful in securing an extension to the Driekop Shaft from the Modikwa JV. This extension is significant in that it supplements the underperformance at Clapham Shaft.

Outlook

The revised plan will result in a smaller but more profitable operation. A further strategic review will be undertaken in FY2013 which will assess the status of the mine and examine the potential to expand it by exploiting the deeper UG2 and the yet untouched Merensky resources.

 

Marula – key statistics  

      FY2011   FY2010  
REVENUE (Rm)  1 300   1 130  
Platinum      728   655  
Palladium      316   188  
Rhodium      183   225  
Nickel      28   22  
Other      45   40  
COST OF SALES    (1 341)  (1 141) 
Mining operations      (1 034)  (876) 
Concentrating operations      (152)  (146) 
Treatment charges      (3)  (2) 
Depreciation      (152)  (117) 
GROSS PROFIT    (41)  (11) 
Intercompany adjustment*      10   27  
Adjusted gross profit      (31)  16  
Royalty expense     (41)  (23) 
PROFIT FROM OPERATIONS IN IMPLATS GROUP   (72)  (7) 
Gross margin   (%)  (3.2)  (1.0) 
SALES VOLUMES IN CONCENTRATE      
Platinum   (000oz)  70.6   70.1  
Palladium     72.9   72.6  
Rhodium     14.7   14.7  
Nickel   (t)  222.0   216.6  
PRICES ACHIEVED IN CONCENTRATE       
Platinum   ($/oz)  1 481   1 244  
Palladium      622   345  
Rhodium      1 782   2 025  
Nickel   ($/t)  16 216   13 496  
EXCHANGE RATE ACHIEVED (R/$)  6.91   7.51  
PRODUCTION        
Tonnes milled ex-mine   (000t)  1 542   1 545  
Headgrade (6E)  (g/t)  4.39   4.36  
Platinum in concentrate   (000oz)  70.6   70.1  
Palladium in concentrate     72.9   72.6  
Rhodium in concentrate     14.7   14.7  
Nickel in concentrate   (t)  222.0   216.6  
PGM in concentrate   (000oz)  185.7   184.6  
TOTAL COST (Rm)  1 186   1 022  
   ($m)  169   135  
Share-based compensation   (Rm)  (6)  26  
– per tonne milled**   (R/t)  773   645  
   ($/t)  110   85  
– per PGM ounce in concentrate**   (R/oz)  6 419   5 395  
     ($/oz)  913   714  
– per platinum ounce in concentrate**   (R/oz)  16 884   14 208  
   ($/oz)  2 401   1 880  
– net of revenue received for other metals**   (R/oz)  8 782   7 430  
   ($/oz)  1 249   989  
– per platinum ounce in concentrate    (R/oz)  16 799   14 579  
   ($/oz)  2 389   1 930  
CAPITAL EXPENDITURE (Rm)  242   281  
   ($m)  34   37  
LABOUR INCLUDING CAPITAL (number)  4 209   3 968  
Own employees     3 272   3 241  
Contractors     937   727  
Centares per panel man per month   (m2/man)  20.1   25.0  
* Adjustment note: The adjustment relates to sales from Marula to the Implats Group which at year-end were still in the pipeline.  
** Excluding share-based compensation.