[miningmx.com] — JUNE quarter production numbers from TSX- and JSE-listed Eastern Platinum (Eastplats) are disappointing and have forced management to drop its production forecast for the year to end-December by 25%.
Eastplats produced 20,528 ounces of platinum group metals (pgms) in the June quarter (30,820 oz in the corresponding quarter), making this the third consecutive quarter of declining output from the company’s Crocodile River Mine (CRM) near Brits.
Eastplats reported production of 25,387 oz for the March quarter and 32,752 oz in the December quarter.
CEO Ian Rozier had previously attributed the drop in March quarter output to safety issues and the traditional slow start-up of operations after the Christmas break.
He said the further slump in the June quarter was the result of labour issues related to the illegal underground sit-in, followed by an unprotected strike at CRM in early May.
As a result of the production shortfalls in the first half of Eastplat’s financial year, Rozier said pgm production for the full year had been revised to about 105,000 oz.
According to JP Morgan Cazenove analysts Steve Shepherd and Allan Cooke, that’s a 25% drop on the initial management guidance for the year of 140,000 oz.
They said: “Accounting for the last two quarters’ production implies that management is expecting production of 59,000 oz in the second half – down 16% from the second-half 2010 production of 71,000 oz.
“This is a worry for us, since we had assumed moderate production growth year-on-year in the second half with the Crocette section contributing.”
Despite this, the JP Morgan analysts remained upbeat over Eastplats’ prospects. “Despite the weak first-half 2011 production result, we remain positive.
“Eastplats currently offers the highest production growth of all the pgm stocks we cover. This, combined with a cashed-up balance sheet (net cash of $347m at the end of March 2011) and a generally sound management track record over the last couple of years, leads us to maintain our overweight rating on the stock.”
Eastplats’ shares have taken a pounding because of the poor production performance and recent negative investor sentiment against platinum stocks generally.
The share has dropped from a 12-month high of R13.50 to a low of 550c at the end of June, before recovering to current levels of around 660c.
