Pan African Resources is set to buy the 600,000 oz pgm Phoenix Platinum tailings treatment project in South Africa for R71 million, it was revealed today (21st May).

The gold junior will be tapping into a grade of between 1.11 grams per tonne and 4.18 grams per tonne and expects to extract the metal at a recovery rate of 55 per cent at less than $350 per oz.

Although the project has not yet been constructed, it is believed to have a seven-year lifespan on Phoenix Platinum's existing chromite dumps and a 14-year stretch on current arisings.

Metorex, which owns 55 per cent of Pan African, explained that the decision to sell up was motivated by a desire to offload non-core assets as it aims to tackle its R2 billion-plus debts.

Chief Executive Officer Terence Goodlace also explained that much of the money was spent on building its copper and cobalt project at Ruashi in the Democratic Republic of Congo.

"The objective is to generate sufficient liquidity for purposes of its near-term debt commitments whilst funding the Ruashi project during its ongoing build-up phase," he said.

By contrast, Pan African Chief Executive Officer Jan Nelson noted that the company should be able to balance its capital expenditure on Phoenix after 14 months of full production, or roughly 12,000 oz pgm.

"This could become bigger than our gold business, but let's not get ahead of ourselves," he said.

Pan African believes that its 12 to 13 per cent chrome content concentrate could prove attractive for one of the major platinum miners, providing it can secure an offtake agreement.

With that in mind, Mr Nelson also revealed that he will consider enlisting Braemore Resources for its ConRoast technology, which treats high-chrome content platinum concentrate.

"If they are up and running, their process to treat concentrate costs us less money and there's no technical risk because it is [a] new process, then yes, we'll look at it," he told MiningMX.

"We still have to negotiate an offtake agreement with one of the major's smelters. There will be a penalty for the chrome content and we have built that into our financial models just to see how robust the project is."

Pan African directors not serving on Metorex's board have confirmed that they "consider that the terms of the transaction are fair and reasonable insofar as all shareholders of the company are concerned".

Sources:

Pan African buys platinum project (21/05/09)

Pan African maps platinum strategy (21/05/09)

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