Ian Rozier, CEO, Eastplats
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» Eastplats to lift platinum output
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» Eastplats targets 700,00 oz output


Eastplats shares fail to ignite
Allan Seccombe
Posted: Mon, 14 Apr 2008

[miningmx.com] -- THE steady trickle of good news from Eastern Platinum has done nothing to drive up the share price, with the market having already factored in much of the news and is now waiting for delivery on production promises in a difficult operating environment, analysts said on Monday.

The latest release from TSX- and JSE-listed Eastplats is its preliminary March quarter production numbers, which increased despite the difficulties with power in January and February.

Platinum group metal (PGM) production was 4.5% higher at 27,825 oz as head grade and recoveries improved, offsetting declines in run-of-mine tonnes and processed tonnages, Eastplats said.
to cost you a lot more to grow
The most significant factor in the quarter was nine days of shutdowns because of power blackouts from state power utility Eskom, which cost Eastplats an estimated 6,000 PGM oz.

The entire mining industry in South Africa was shut for a week in late January when Eskom issued a warning on its power supplies. Power was restored to 90% of normal consumption during February and to 95% for some mines in March.

“After a very disruptive period in January and early February with respect to power cuts and ongoing reductions in power supply, we have recovered extremely well,” said CEO Ian Rozier.

Eastplats also told the market on Monday it had secured purchasing rights to four generators capable of producing 23 megawatts of electricity, allowing it to develop the Crocette section at the Crocodile River Mine (CRM) as well as its Spitzkop-Kennedy’s Vale development project on the Eastern Limb of the Bushveld Igneous Complex.

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The JSE-traded shares gained 1.9% on the news, but looking at the graph, the trend is steadily downwards from the R32/share high it reached in early March. The shares were last at R23.80, a 25% fall in little more than a month.

“It’s very difficult for the market to buy into a growth story in an environment where you don’t have power or it’s going to cost you a lot more to grow,” said RBC Capital Markets analyst Leon Esterhuizen, referring to the additional fuel costs in running generators.

“People want to see Eastplats deliver on their expansion promises. Once they do that I have little doubt their share price will go up again,” he said. “Their current production report seems to indicate they are on a better production growth path. I have little doubt they will go up again.”

Eastplats said the generators would utilise heavy fuel oil, which is cheaper than diesel.

Since March 31 when it released interim results, Eastplats has put out a news release almost every second working day, drip feeding the market news on the start of mine construction at Crocette and the start of trial mining and bulk sampling at Spitzkop.

“A lot of this news, which is generally good, has already been priced in. It’s a story they’ve been bandying about North America quite aggressively for some and now it’s time to deliver,” said an analyst, who declined to be named.

At the end of December 2007, Eastplats had cash holdings of $190m.

One company that famously over promised and under delivered was Uranium One, which has struggled to meet its production targets at the Dominion mine in South Africa. Its shares took a hefty smacking from investors, with the shares shedding 80% of their value in the year to late March.

Rozier told Miningmx a year ago Eastplats wanted to raise PGM production to 700,000 oz in seven years. It has resources topping 100 million PGM oz.

There is an existing shaft system at Kennedy’s Vale, which is down dip of Spitzkop. Combining the two projects could lead to production in the order of 300,000 PGM oz/year, he said at the time.