[miningmx.com] – AQUARIUS Platinum has put its Everest mine on care
and maintenance, citing a cocktail of difficulties that include ramp-up and disruptive
labour difficulties, as well as sub-economic prices for platinum group metals.
Earlier this month, the company said it had temporarily closed its Marikana mine; a
clear indication that the pressure on South Africa’s sector had ratcheted up
notwithstanding a softening in the rand against the dollar.
Based on March quarter operating data provided by Aquarius Platinum, the company
has now shed 24% of total mine production and some 30% of attributable
production, equal to some 120,000 ounces (annualised March quarter).
Shares in Aquarius fell 10% in the first hour of JSE traded. The share is now priced
at R7.10/share. It has fallen more than 60% since the beginning of the year.
All eyes will certainly switch to the rest of the South African platinum sector,
including Anglo American Platinum (Amplats), which said it was studying options
regarding optimising its own asset suite – a statement thought to mean closures and
retrenchments.
The distress in the sector prompted mines minister, Susan Shabangu, to convene a
meeting of MIGDETT (Mining Industry Growth, Development and Employment Task
Team) on June 19 in an effort to find ways of supporting the industry.
Aquarius said that putting Everest on care and maintenance was prudent considering
the pressure placed on the company’s balance sheet. In the nine months ended
March, Aquarius had seen a cash outflow, including from investing activities, of
$110m to $206.7m. Everest’s sustaining capital is not particularly crippling (R79.4m
in the March quarter versus R75m for Marikana), but it’s clear that with only a week
of the financial year remaining, Aquarius was unlikely to reverse its $122.9m loss as
reported in the nine months until end-March.
“[T]he board of Aquarius has concluded that the only defensible strategy for any
platinum producer is to cut all non-essential capital expenditure, and place all non-
contributing assets on care and maintenance while optimising profitable operations
for maximum contribution in the current low price environment.’
This is akin to “battening down the hatches’, but it makes the future of Aquarius
Platinum as a platinum operator dependent on its two extant mines: the mature
Kroondal mine, and the operations of Mimosa Platinum Mines in Zimbabwe.
According to the Financial Times on June 20, Zimbabwe President Robert
Mugabe described current indigenisation – in which Aquarius Platinum must part
with control of the asset – as “too generous’.
Stuart Murray, CEO of Aquarius Platinum, was not immediately available for
comment, but the company said in a statement to the JSE that poor ground
conditions and “ongoing disruptive industrial relations over an extended period’,
coupled with low PGM prices, had made its decision inevitable. The mine was closed
effective June 21.
“The board is of the view that the platinum market is in an abiding surplus, with the
industry generating nearly half a million ounces of unneeded platinum each year
due to the current European economic crisis,’ Aquarius said.
“From an operating perspective, costs continue to rise at above the rate of inflation,
while labour productivity has declined,’ it said.
Tellingly, Aquarius Platinum said in its March-quarter operational and financial
report that labour relations were at an ebb, and identified new union the Associated
Mineworkers and Construction Union (Amcu).
However, it also suggested that ceasing mining at Everest for a 12 to 18-month
period in favour of aggressive development was an option, as it sought the best way
to integrate expansion into Everest South, now known as Buttonshope; the property
Aquarius bought from Northam Platinum.
In this respect, Aquarius said the effect of stopping mining at Everest would be
“value neutral’ given the current PGM price environment.
