Eastplats hangs in there

Brendan Ryan | Fri, 13 Nov 2009 10:56
[miningmx.com] -- EASTERN Platinum (Eastplats) shares have pushed back to the 600c level on the JSE following a “break even” September quarter earnings performance despite the impact of an illegal strike in July.

Eastplats shares jumped 50% in a matter of days in mid-October to hit 600c driven by renewed market speculation over a possible takeover bid.

There have been frequent suggestions that either Xstrata or Aquarius Platinum may be interested in acquiring the company.

The share pulled back to around 540c after Aquarius Platinum CEO Stuart Murray denied making any move on Eastplats and Xstrata declined to comment.

According to Eastplats CEO Ian Rozier, the illegal strike “severely interrupted production at the mine in July and August. By September, production levels had returned to those achieved in June.

“Despite the negative impact of this disruption the company anticipates production to return to budgeted levels in the fourth quarter as new mining crews complete their phase-in and training periods.”

Rozier pointed out Eastplats had greatly reduced its general and administration (G&A) expenses dropping them 53% to $7.1m for the nine months to end-September fronm $15.2m in the corresponding period of 2008.

He commented, “the decrease in G&A was due to a reduction in certain senior level staff in Johannesburg in late 2008 and a general reduction in corporate travel and investor relations activities.”

JP Morgan analysts Steve Shepherd and Allan Cooke estimated that Eastplats’ production of platinum group metals (pgm) for the year to end-December should be around 125,000oz which would be slightly short of the target of 135,000oz provided by the company in May.

The analysts commented, “we remain overweight Eastplats based on the group’s unstressed balance sheet, strong management and substantial, readily accessible pgm inventory – relative to the current production rate.

“Eastplats is not a ‘bear market’ stock in our view but we have little doubt that considering the considerable option value of its vast minerals inventory (91m oz) the group’s shares are strongly geared to a global recovery.

“Eastplats lost some 90% of its value from peak to trough through this downcycle.”

The writer owns shares in Eastern Platinum.