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Aquarius planned LionOre merger Posted: Tue, 03 Apr 2007 [miningmx.com] -- AQUARIUS PLATINUM had proposed a merger with LionOre Mining International until the Toronto-listed firm accepted a R28bn takeover from British mining house Xstrata last month. That’s the speculation doing the rounds in London – rumours that Aquarius Platinum CEO Stuart Murray will neither confirm nor deny. If the speculation is true, it's instructive because it provides some insight into what Aquarius Platinum plans next. The general view concerning Aquarius is that it’s in a steady state. Operations are generally well run, the platinum group metal market (PGM) is strong and cash flow is pumping. Merrill Lynch recently upgraded Aquarius despite the outperformance of its platinum rivals. It argued in a 13 March report that Aquarius’s London peer – Lonmin – still had to get its mind around cost pressures and other issues. As a result, Aquarius would still be favoured: it’s now simply a tighter run ship. But there’s a view that Aquarius will start drifting from around 2008, when production at its mines will be at full tilt and total production will plateau at about 700,000 oz/year. “In order to cement its place as a mid-tier platinum producer Aquarius needs to continue growing production,” said Morgan Stanley in a report dated February 2. However, the question is how it intends growing. Morgan Stanley said more pool and share agreements – principally with Anglo Platinum – were on the horizon. Those are arrangements in which mineral resources are shared in such a way that life of mine and/or profitability is increased on otherwise limited properties. But the prospect of a merger between Aquarius Platinum and LionOre Mining suggests Aquarius has bigger ambitions and even interests in other metals, though nickel wouldn’t be a foreign metal to Aquarius as it occurs frequently with PGMs. At first glance a merger between Aquarius and LionOre looks quirky. However, both companies have a similar, London-focused share register and some operational synergy. For example, LionOre has capacity to add a platinum refining to its patented Activox, technology it’s long developed to allow it to mine low-grade nickel mines. The question now is where Aquarius will turn next. While it’s hardly hit a glass ceiling, the ever-entrepreneurial Murray will be casting around for some answers. “Aquarius may have left it too late to grow in the platinum space unless it organises a deal with one of the remaining juniors, such as Wesizwe Platinum or Platinum Group Metals,” said Mark Smith, an analyst at RBC Capital Markets. However, the feeling is that these shares have already run hard and it’s doubtful Murray thinks either company owns significant resources to make a difference to Aquarius’s business. Steve Shepherd, an analyst at JP Morgan, rated Murray highly, particularly his operational nous. But he makes the interesting point that though Aquarius is fully empowered it’s not an empowerment company. That means it may not be a preferred partner in the consolidation of South Africa’s platinum fields. “Economics versus politics may be a hard riddle to solve for Murray and his team,” said Shepherd. Click Here to subscribe to our daily newsletter
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