Aquarius Platinum faces $118m bond rethink

[miningmx.com] – AQUARIUS Platinum may be forced into another round of equity raising or refinance some $118m in convertible bonds following the collapse of a proposed $37m sale of platinum assets to a Chinese consortium.

Goldman Sachs said in a report dated October 15 that the company was burning $10m in cash at the current platinum price and would therefore be unable to redeem the balance of a convertible bond that matures in 2015.

In all probability, the company would have to either refinance it which would “come at a higher interest cost” and drag further on strained cash flow, or “do another round of equity raising” which would be dilutive to existing shareholders, Goldman Sachs said.

Aquarius Platinum said earlier this year that the proceeds of the sale of its Blue Ridge and Sheba’s Ridge platinum assets to a consortium led by China National Arts & Crafts Corporation would be used to ease pressure on the balance sheet.

A portion of the proceeds from the asset sales would also have been channeled towards helping finance three projects of which the largest was the $70m expansion of Aquarius’ Mimosa platinum mine in Zimbabwe by 70,000 PGM ounces.

On August 7, Aquarius posted a net loss of $13m – a vast improvement on the $288m loss of the previous financial year but it was a performance Aquarius CEO, Jean Nel, said had “irritated” him as the figures remained in the red118.

Since taking the reins of Aquarius, Nel has closed loss-making mines and cut debt of some $165.7m following a $226m rights offer which increased the company’s cash balance to $137m as of the close of the 2014 financial year.

“On our estimates the company needed the $56m from sale of these assets – together with cash on hand plus operating cash flow – to be in a position to redeem the remaining $118m 2015 convertible bond,” said Goldman Sachs.

The asset sale failed after Aquarius Platinum failed to win regulatory approval from South Africa’s Department of Mineral Resources (DMR).

The DMR said that the problem with the Aquarius Platinum transaction related to black economic empowerment issues without providing details. It added that it would attempt to resolve the problems, potentially raising the prospect the deal could be resuscitated.

Shares in Aquarius Platinum have fallen 12.5% this month after reaching an intra-month high of R3,66/share.