Aquarius Pt boss critical of platinum silos

[miningmx.com] – AQUARIUS Platinum CEO, Jean Nel, said there was an urgent need to exploit synergies between platinum miners operating on the western side of South Africa’s Bushveld Complex, and added the firm could sanction a corporate deal of up to $40m.

Commenting following publication of the group’s full-year results, in which non-cash impairment charges took the firm to a full-year net loss of $98m (2014: -$13m), Nel said it did not make sense to keep operating “in silos”.

“The restructuring that is playing out on western limb is principally driven by Amplats [Anglo American Platinum],” said Nel. “There are synergies where we operate as neighbours, clearly. But we have not reached agreement on how synergies are exploited.

“I am of a view there are synergies. It takes two to tango,” he said without providing details of possible new business in which Aquarius Platinum could become involved.

He urged the platinum sector to be “more aggressive” as “… we don’t have an operating environment where people can operate in silos. It doesn’t make sense to me”.

Aquarius Platinum’s business has largely been built by capitalising on consolidation and synergies in the sector. Its remaining operating South African mine, Kroondal, has Amplats as a shareholder after the two companies agreed to pool and share their adjacent mineral resources. Aquarius Platinum mines the resources from Kroondal.

Nel added that the company’s balance sheet could support interest-bearing debt of between $30m to $40m in the event an acquisition or project could provide returns to shareholders, but he was dismissive of chasing volume, adding that the macroeconomic conditions in the platinum sector cried out for short-term output cuts.

“Dollar metal prices are at unsustainable levels,” said Nel. “If they continue, I have no doubt primary supply will begin to drop off. It is impossible to keep going,” he said, although he added that this had been the expectation for a while.

“There has to be a pull back in production in the short-term. Until then, it’s hard to see good prices in dollar terms,” said Nel.

Aquarius Platinum received nearly 7% less in dollar terms for its South African platinum production, equal to $1,098/oz in its 2015 financial year – a 10-year low. In rand terms Aquarius received about R11,500 per platinum group metal ounce.

Unit costs were well contained, while production at Kroondal and Mimosa, the Zimbabwe mine in which Aquarius has a 50% share, had never been higher. Nonetheless, the company recorded a $28m excluding one-off items.

The exceptional items relate to a $28m impairment at its Blue Ridge operation, currently in mothballs while Aquarius seeks to sell it, and a $48m write-down relating to its joint venture assets.

The sale of non-core assets had, however, shored up the company’s balance sheet with some $205m in cash, all of it unrestricted.

Aquarius had embarked on a previously announced shaft-by-shaft viability assessment, but for now Nel believed the only remaining non-core asset was Blue Ridge which was subject to “advanced” sale discussions, possibly due for completion before December.