[miningmx.com] – ON a day when Eastern Platinum (EastPlats) announced it would close its Crocodile River Mine by July, the virtue of owning cheap access to quality platinum resources was underlined by Aquarius Platinum.
It announced an extension of a long-standing pool and share (PSA) agreement with the neighbouring Rustenburg mine owned by Anglo American Platinum (Amplats).
It was an agreement analysts said was no surprise; yet they were able to applaud it reflecting, perhaps, the premium placed on good news in an industry currently shaped by misery.
The arrangement enables Aquarius Platinum to extend the life of its Kroondal Platinum Mine by three years to nine-and-a-half years, and helps de-risk about half of group output without having to raise project capital.
Compare the PSA to the C$700m EastPlats has raised since 2006 for its various projects which lie in mothballs, for now.
“By making use of the existing underground access and the surface concentrator, the agreement essentially provides Aquarius with capex-free ounces to add to its production profile,” said Justin Froneman, an analyst for Standard Bank Group Securities. He added that a further extension was possible, at least geologically.
“We are not surprised to see such an agreement reached, and it is an important step forward for the company providing it with more breathing space due to pressures of the previous short mine life,” said Investec Securities in a morning note.
Kroondal is expected to produce 240,000 ounces of platinum of which half is attributable to Aquarius, with the remainder flowing to Amplats which also toll treats the concentrate and charges a royalty on ore mined.
Last year, Ian Rozier, CEO and president of EastPlats, bemoaned an 82% increase in costs against a 17% drop in the rand basket for PGMs. The cooperation between Amplats and Aquarius Platinum is just sensible. Strength in numbers.
“The continuation of the PSA should not be a surprise and the arrangement should work for both parties against a continuing back drop of weak prices and cost pressures through labour unrest,” said John Meyer, an analyst for SP Angel.
Aquarius Platinum also announced today it had reached a one-year wage agreement with its majority union, the National Union of Mineworkers, at the Kroondal mine representing an “… average increase which slightly exceeds the increase in the cost of living”. It measured inflation by the consumer price index which is between 6% and 6.5%.
The deal, effective from July 1, covers 8,120 workers, including contractors, and represents nearly five months of difficult negotiation on behalf of Aquarius Platinum, led by Jean Nel, the company’s unshowy (but clearly effective) CEO. According to analyst estimates, the wage increases would be somewhere between 7% and 9%.
Given the expected labour tensions at South Africa’s gold and platinum mines this winter, that’s another important achievement by Aquarius Platinum as well as the NUM itself. Might, then, other single digit wage increases be achieved by other platinum (and gold) producers?
