LONMIN, the world’s third-largest platinum miner, has secured $50m in financing to build a tailings treatment project that will add 29,000oz of low-cost platinum to its annual production as it shuts unprofitable mines.

“When it comes into production, the tailings treatment project will deliver low-cost production that, although relatively small compared to the current 700,000oz per annum guidance for 2016, is a welcome reaffirmation of Lonmin’s intention, to deliver profitable platinum ounces as it restructures the business,” John Meyer, an analyst with London-based SP Angel, said.

Lonmin described the funding it had secured as “competitive”, and said it was linked to a “project finance metal streaming” arrangement.

It gave no details about who had provided the finance or how the scheme would work.

Of the funding, $9m had already been received, allowing the project to start.

It will re-treat 26-million tonnes of tailings at 300,000 tonnes a month to deliver 29,000oz of platinum a year or 55,000oz of four platinum group metals a year, being platinum, palladium, rhodium, and gold. The plant will have a recovery rate of 35% of the 1.42g per tonne of material fed into it.

The project “is part of our strategy to focus on low-cost ounces to maximise our cash position and create value for all our stakeholders”, Lonmin CEO Ben Magara said. Full production will be reached in 2018.

The project is one of two in Lonmin’s pipeline, with the other being a final R2.5bn investment to bring its partially built K4 mine into production.

Bound by strict covenants rewritten when it was refinanced late in 2015, Lonmin was operating under strict controls on spending up to 2020.

“We are conscious that we must fund this K4 project from our own operational cash flows, and we are now starting to be cash-flow positive after capex,” Magara said in May.

Lonmin is understood to be looking at options at K4 to continue development work without recourse to its balance sheet.

This could be done by doing enough on reef work so that the mine produces enough platinum group metals to cover the cost of development work to prepare the mine for when the platinum market improves and the board approves the final spend.

The concentrator at K4 was the best in the company, according to results from tests treating ores from mines and dumps across the Lonmin property, a source said, adding that even at subdued platinum group metal prices, the mine would be “printing money”.

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