Stuart Murray, CEO, Aquarius Platinum
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» Focusing on small end of sector - Stuart Murray, Aquarius Pt
» Deal pipeline ahead - Aquarius
» Aquarius trades up on takeover talk
» Aquarius downplays Impala buyout talk
» Aquarius Pt styled SA’s “King Rat”

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Aquarius builds up its war chest
Brendan Ryan
Posted: Wed, 26 Apr 2006

[miningmx.com] -- STRIKING feature of a good set of March quarterly results from platinum junior Aquarius is the way in which the company is steadily building up an impressive cash war chest.

Aquarius started the March quarter with a cash balance of US$85m (about R510m) to which it has now added US$34,6m to bring the total to US$119m (about R714m) at the end of the quarter.

If the company turns in an operating performance during the current June quarter which matches or beats what it achieved during March then higher ruling prices for platinum group metals (pgm) will further boost revenues. End result could be further increases in cash-on-hand of between $50m and $70m.
The point is that Aquarius wants to expand
That could bring the total cash balance at end-June to between $170m (R1bn) and $190m (R1,1bn) which is a considerable amount for an operation the size of Aquarius. It immediately raises the question of what CEO Stuart Murray intends doing with the money.

Murray could not be reached for comment and neither could Perth-based company secretary Willie Boehm. In February this year, when Aquarius released its interim financial results, Murray said he was looking around to see if there were "any assets out there" of interest to his group.

Murray last year famously described Aquarius as being the "King Rat" in a situation where the SA platinum industry was made up of "three 600 pound gorillas" - in the shape of Anglo Platinum, Impala Platinum and Lonmin - and then "a whole lot of rats and mice scurrying around."

So, what can a platinum junior buy for R1,1bn assuming it decides the asset is worth it? Well, the current market cap of Eland Platinum is around R1,4bn which puts it in striking distance particularly as Aquarius could easily pitch for it offering shares plus some cash as a sweetener.

The point is that Aquarius wants to expand and it is now in an excellent position to do so with cash on hand and a proven operating track record. The March numbers show just how well the new Everest mine is shaping up.

Everest is still in ramp-up mode with March being its first quarter at fully-operational status. During March, Everest produced 46,081 oz of pgm with concentrator recoveries running ahead of expectation at 65%. The mine reported a gross cash margin of 53%.
The company is steadily building up an impressive cash war chest
Those are excellent statistics compared with the ramp-up track records reported from the new operations started by both Anglo Platinum and Impala Platinum. Aquarius is also now forecasting that the Everest mine will be completed for a total cost of R707m against an original budget of R819m.

Compare that performance with the state of play at Anglo Platinum/ARM’s Modikwa mine. Modikwa is slightly larger than Everest and will produce 162,000oz of platinum annually when it hits full output compared with 135,000oz/year for Everest. But Modikwa’s capital cost will be at least double with the original estimate being R1,4bn. The mine has been in ramp-up mode for three years and is still not at full output. Modikwa’s cash margin for 2005 was a measly 9,7%.

It was not all plain sailing for Aquarius as the "problem child" Marikana mine continued to give trouble. In the December quarter Aquarius cancelled its agreement with contract miner Moolman Mining and replaced them with new contractor MCC. Moolman and Aquarius now have legal actions underway against each other.
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Production from the open pit at Marikana plunged 82% to 51,000t from 291,000t in the December quarter mainly because of heavy rains in January/February which flooded the main bottom section of the pit. Four times the average rainfall for this period was recorded with three, 1 in 10 year flood events being recorded in the surrounding area.

According to Aquarius; "MCC have mobilised on site and are on schedule to deliver the full production schedule for the main pit by the end of the financial year despite the flooding setback."