Everest mine needs higher prices

Brendan Ryan | Tue, 27 Oct 2009 12:01
[miningmx.com] -- WORK is well under way to re-establish the infrastructure at Aquarius Platinum’s damaged Everest mine, but a decision to restart operations will only be taken at higher rand platinum prices.

On Tuesday Aquarius CEO Stuart Murray said: “We need to earn a good margin to justify restarting operations, otherwise what’s the point of taking the metal out of the ground?

“We need a rand basket price per platinum ounce mined of between R9,000 and R10,000 and we are only receiving around R8,000 at present.

“To get such higher prices, either the world economy has to recover or the rand has to weaken and I don’t see any sign of the rand weakening in a hurry.”

Murray reported in the Aquarius September quarterly results statement that the department of mineral resources (DMR) has now removed the original Section 54 notice suspending operations at Everest, which means normal mining operations can be resumed.

Operations at Everest were suspended in December 2008 after geotechnical problems affected the stability of the main decline shaft.

Two new decline shafts are now being sunk to re-establish access, and will intersect with the existing mine workings in May 2010. The total cost of the entire reestablishment project at Aquarius is about R259m.

Murray said: “Completion of phase two and production ramp-up to process plant resumption will require approximately 10 months. Project execution is proceeding as anticipated to place Everest in a state of readiness to resume operations.”

Aquarius reported solid September results, showing a profit despite the strong rand and the impact of strikes at its Kroondal and Marikana mines. These strikes cost the group about 16,000 ounces of lost platinum group metal (PGM) production.

The group made a net profit of $9.5m for the quarter, compared with a net loss of $21.5m for the comparable quarter in 2008.

Murray said: “We had a positive operating cash flow after paying for stay-in-business capital expenditure, and I am very happy with that situation.”

The exercise of warrants to acquire Aquarius shares by Zijin Mining and Imbani - which were linked to the acquisition of Ridge Mining - have boosted Aquarius’ cash holdings to $195m.

In the quarterly report, Murray said: “We will continue to seek further growth opportunities and are well positioned to do so in an industry that is cash-strapped and under pressure.”

Asked to elaborate, Murray replied: “We are looking for the same thing we have always looked for, which is a suitable combination of price and value.”