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Near-term platinum producer Ridge Mining (RDG:AIM) has proposed to build an independent smelter in South Africa in partnership with a major resources group and the Industrial Development Corporation (IDC).

It has started a feasibility study, which should take a year, and will reveal the major’s name in mid-2008. The smelter was originally part of Ridge’s Sheba platinum project but the company believes there could be greater value in a standalone venture to also treat third-party produce. Finance director Donald McAlister said financing wouldn’t be needed until the H2 of 2009, prior to a two-year build programme.

State energy company Eskom recently implied it would not guarantee power to any major industrial developments in South Africa until 2012 because of ongoing supply problems in the country. It has since said it would take up to six months to give a quote for power on new projects. The Sheba project is due to start production in 2012. Ridge has commissioned a US consultancy to identify alternative power sources should Eskom not be able to support Sheba and the new smelter.

Sheba will cost $1 billion to develop. The feasibility study detailing the costs should be published in the second week of April. The IDC currently owns 26% of Sheba and is expected to pass on this stake to a black empowerment partner once Ridge applies for the mining licence at the end of 2008. Ridge said it will ‘almost certainly’ bring in a partner to help develop Sheba, given the project’s large scale. This could include Chinese mining house Zijin, which took a 29.9% stake in 2006, including warrants, but has scaled back to 19.9%. Analysts assumed Zijin wanted the offtake agreement on Sheba but McAlister said it was now focused more on investing. ‘They have changed tactics and I understand that they don’t want such a high equity exposure while we are still in development. Zijin don’t have first right of refusal on the offtake but you could argue that they have the inside track on the project.’

Production starts in Q4 this year on Blue Ridge, a smaller platinum project than Sheba but with significant potential. Ridge purchased the Millennium project from Lonmin (LMI) earlier this month, having waited several years for government approval. The site’s geology is contiguous with Blue Ridge and part of the project has already been include in Blue’s mine plan. Millennium increases the resource at Blue Ridge by 72% to 9.2 million ounces of platinum group metals. With platinum prices being driven higher by the South African energy crisis, Ridge said it would consider expanding the Millennium’s capacity. It is about to hedge a proportion of Blue Ridge’s future platinum output as part of financing requirements.