[miningmx.com] — EASTERN Platinum (Eastplats) was punished by the markets on Thursday as investors’ disappointment over woeful results were exacerbated by ongoing labour unrest, which has interrupted production and allegedly caused damage to its flagship mine.
Despite a warning to investors in April that its production figures for the quarter to end-March would be substantially lower than the previous comparable period, the extent of the financial impact only became clear in the full set of results.
The company reported a net loss of $5.6m, compared to $824,000 profit for end-March 2010 on the back of a 17% decrease in platinum group metals (pgm) sold to 25,387 ounces. This came despite Eastplats receiving 18% more per ounce in dollars ($1,136) and 11% in rands (R7,963). The production slowdown has subsequently pushed cash costs above income, reported as R8090/oz ($1154/oz).
At around 16:00 Eastplats’ JSE-listed stock traded at 584c, down 26.5% for the day, while it traded more than 23.3% down on the London Stock Exchange at 52.5p.
The company attributed production slowdown to a safety review and alterations on roof support requirement.
“This temporarily decreased the number of working panels during the quarter and impacted production,’ read a company statement.
Also, the company reported sabotage of underground electrical and pumping equipment at its flagship Crocodile River mines during an allegedly violent labour dispute the past week. The damage caused resulted in flooding and the malfunctioning of the ventilation system
The altercations started on Friday, following the rejection of Eastplats’ offer of a 9% wage increase by the National Union of Mineworkers, which demanded 13%.
“On Friday May 6, mine vehicles were driven by employees through the security gate to the Zandfontein Mine causing damage to mine property,’ read the statement.
“Employees then embarked on unprotected industrial action. Mine services at both Zandfontein and Maroelabult underground mines were also damaged, and for safety reasons the management at Crocodile River instructed the mines to be vacated.
“Approximately 180 workers then proceeded to unlawfully occupy the mines.’
Subsequent to obtaining a court order and the involvement of trade federation Cosatu the mine was vacated, whereafter safety inspections showed the extent of the damage caused.
“The mine progressively resumed operations once safety concerns had been addressed, and the mine concentrator continues to operate. However, there has been further unprotected industrial action, including an unlawful blockade at the mine entrance.
“If this situation continues, then the company intends to deal with all workers who do not report for work from the commencement of the morning shift on Thursday May 12 2011 in accordance with the legal procedure available to CRM.’
PROJECTS RAMP-UP
Eastplats said spending on ramp-up costs at its Mareesburg and Kennedy’s Vale project would escalate during the second quarter.
The Mareesburg open pit mine is expected to increase Eastplats’ production to about 325,000oz of pgm by 2014, while the group plans to build a 90,000 tonnes per month (tpm) concentrator at Kennedy’s Vale.
“To accommodate future capacity increases, the plant at Kennedy’s Vale would include the civil and other surface infrastructure work required for an additional 90,000tpm processing stream and appropriate tailings facility infrastructure to process up to 180,000tpm of ore.’
