[miningmx.com] — THE platinum price would only respond to supply
cutbacks once the major PGM producers embark on shaft closures, analysts said on
Monday, commenting on Aquarius Platinum’s decision to shut its Marikana No. 4
shaft and concentrator.
The resolution to place the operations at Marikana under care and maintenance
came after the asset’s No.5 and Siphumelele (Bleskop) shafts were closed on March
27.
“This decision has been made in the interests of preserving the ore reserves until an
improved economic climate merits their extraction in the future,’ read a company
statement, adding that the remaining activities at Marikana – a mine it operates
with Anglo American Platinum (Amplats) as a joint venture partner – would be
consolidated with the Kroondal operations.
The mine was already operating on a negative cash margin of 5% during the March
quarter. It’s performance was, however, much better than that of the group’s
Everest mine, which posted a 27% negative cash margin. One analyst speculated
the closure of Marikana could’ve been influenced by JV-partner Amplats, which itself
is conducting a “top to bottom’ review of its operations. Aquarius CEO Stuart Murray
wasn’t immediately available to comment.
Justin Froneman, sector analyst at SBG Securities, said the merits of the decision to
close Marikana should be measured on whether other producers would follow suit.
The mine’s cash costs per ounce produced was R9,800 for 2011; an increase of 22%
on the year before.
“Between 20% and 40% of South Africa’s production cost within a 10% margin of
this number,’ Froneman said. “It is quite congregated at that level.’
Platinum traded at around $1,446/oz on Monday. Metals consultancy Thomson
Reuters GFMS in May estimated the current “all-in costs’ for producing PGMs were
$1,653/oz, a number Froneman said he concurred with. “Yes, platinum group metals
are probably trading 30% too low on an all-in basis against the current price in rand
terms.’
An issue highlighted by GFMS weighing platinum was an estimated inventory
stockpile of 4.5m ounces, which had been growing for years.
On Monday, Numis Securities’ Andy Davidson said production cutbacks would only be
noticed by the market once the major producers start closing shafts.
“It has to be the majors; they need to lead the way,’ Davidson said. “The [Aquarius]
cutback is too small for anyone to notice. There is always a long lead time before
supply responds to the price-cycle, so perhaps we’ll start to see it from now.’
Said John Meyer of Fairfax Securities in a note to clients: “We expect other platinum
miners to follow with shaft closures for higher cost and perhaps more accident prone
shafts.’
Asked whether Aquarius’s management were under pressure given the recent
underperformance of the group coupled with the closure of Marikana, Davidson said
he didn’t think so.
“I haven’t heard anything in the London market that they are losing patience with
the management,’ he said. “When you have the [platinum] price where it is and the
Section 54s [safety stops], shareholders understand that it is all part of doing
business in South Africa.’
