[miningmx.com] – AQUARIUS Platinum is seeking new buyers for its Blue Ridge asset, or the sale of its mine plant as an alternative following the collapse of its disposal to a Chinese consortium earlier this month.
The company is also in discussions to extract value from its mothballed Everest mine against a background of poor market conditions for platinum that Aquarius CEO, Jean Nel, said was being pressurised by “abundant stock levels”.
Nel was commenting in the group’s first quarter production and financial results announcement in which Aquarius posted a $14.8m pretax profit, an $8.5m improvement over its first quarter performance for the previous (2014) financial year.
Nel said the quarter’s results were driven by an improved cost performance at Kroondal, and a restructuring at Mimosa – the only two assets Aquarius still operates following the platinum price shakedown in 2012.
The firm’s flagship asset, Everest, was closed during that period although analysts have said Aquarius may be tempted to sell the asset in order to further bolster its balance sheet with Northam Platinum named as a possible suitor.
However, Nel did not allude to any such discussions saying instead the company was interested in “extract[ing] value from the Everest infrastructure”.
“Good progress has been made in terms of studying the alternatives available to extract value from the Everest infrastructure and discussions with a number of entities are ongoing,” he said, adding it would not start production unless it could generate a return.
Commenting on Blue Ridge, Nel said: “Blue Ridge remains non-core to Aquarius and it will continue to assess all alternatives to extract value from its investment”. This included the sale of the mine or plant.
Aquarius Platinum said earlier this year that the proceeds of the sale of its Blue Ridge and Sheba’s Ridge platinum assets to a consortium led by China National Arts & Crafts Corporation would be used to ease pressure on the balance sheet.
However, the transaction failed after the Chinese walked away from the deal, apparently in frustration after repeated attempts to win the approval of the South African government were rejected.
Nel also addressed the balance sheet which he said his board considered appropriately leveraged despite stress in the platinum market.
“Platinum prices remained volatile in the context of the prolonged strike action in the first half of the year but in September fell to intra-year lows below $1,350/oz, and continued its fall post the quarter to the lowest levels since 2006,” he said.
“Despite c.1Moz of supply being lost during the strike, platinum prices remained under pressure due to abundant stock levels that kept the market well supplied and deteriorating global economic growth expectations in the context of weak economic data,” he said.
Goldman Sachs said in a report dated October 15 that the company was burning $10m in cash at the current platinum price and would therefore be unable to redeem the balance of a convertible bond that matures in 2015.
In all probability, the company would have to either refinance it which would “come at a higher interest cost” and drag further on strained cash flow, or “do another round of equity raising” which would be dilutive to existing shareholders, Goldman Sachs said.
