DMR backs down on Aquarius

[miningmx.com] — AQUARIUS Platinum shares bounced back in trading on the Australian Stock Exchange (ASX) on Tuesday after the company settled its safety dispute with Department of Mineral Resources (DMR).

Both sides have issued carefully worded statements over what happened but it would appear the DMR has backed down from the draconian directive issued to Aquarius by the principal safety inspector for the North West Province.

According to DMR spokesman Jeremy Michaels the root cause of the dispute resulted from a “misunderstanding’ of the terms of the safety directive issued to Aquarius over operations at its Marikana mine in North West Province.

He said the intention of the directive was not for the companies to stop mining.

According to a statement from Aquarius, “the DMR advised all present at the meeting that the recipients of the directive had applied an objective administration interpretation to the directive as opposed to the subjective interpretation afforded to the directive by the DMR.

“Namely, that the import of the directive was to invite recipients of the directive to constructively and expeditiously engage with the DMR with the mutual objective of introducing safety management systems that will reduce fall of ground fatalities in the North West Province and it was not the intention of the DMR to unilaterally prescribe mining methods in the absence of mining companies being given the opportunity to interact with the DMR to collectively determine the best mining practices to achieve that objective.’

The statements were issued late Monday evening after a four hour meeting in Pretoria between the DMR and four platinum companies affected by the directive – Aquarius, Anglo Platinum, Xstrata and Impala Platinum (Implats).

On Friday, chief inspector of mines Thabo Gazi had denied speculation that the DMR was about to enforce strict new mining requirements on Aquarius and other platinum mines using mechanised mining methods.

Aquarius released the directive it had received from the DMR a few hours later leading to a 25% plunge in its share price in London on Friday afternoon and again on the JSE on Monday morning.

The terms of the directive make it absolutely clear what the DMR wanted Aquarius to do and there appears to be little room for “misunderstanding’.

The instruction stated that, “all mining companies in the North West region employing the bord and pillar mining method are instructed..to immediately review the code of practice for the prevention of rockfalls and rockbursts in metalliferous mines, related mine standards and procedures to cater for more effective measures including but not limited to:

“Maximum mining bord width of not more than six metres; extraction ratios should not exceed 75%……..

“Until such time that the aforesaid review is conducted no headings/faces of more than six metres bord widths should be advanced for the purposes of production.’

The directive had hugely negative implications for the affected platinum mines in terms of lower production with Aquarius the most exposed which is why the Aquarius share price plunged.

Aquarius shares recovered more than 10% to trade as high as A$4.65 this morning on the ASX.

Analyst and industry reaction was that the DMR’s action could have been politically motivated following the deaths of five mineworkers in a rockfall at Aquarius’ Marikana mine.

JP Morgan Cazenove analyst Steve Shepherd commented in a research note, “in our experience, when government mining engineers become involved in setting support standards for mines in reaction to “big accidents’, there’s a risk that political considerations might outweigh engineering considerations.

“In the context of the types of support design applied in bord and pillar mechanised mining (and other methods for that matter) “one size definitely does not fit all’.’

That’s a reference to the fact that the DMR apparently based its directive on steps taken by Implats to reduce bord widths to six metres last year after a rockfall at its 14 Shaft.

But that accident took place on Merensky Reef at a depth of 1,000m where mining and rock mechanic conditions are very different to the latest accident at Marikana which took place at a depth of 70m on UG2 Reef.

Aquarius CEO Stuart Murray told Miningmx that, “it would be helpful if we had better and improved lines of communication between the stakeholders before such actions are implemented.

“I am relieved that the intentions of the DMR were in line with the discussions held with the Minister at the safety meeting in Pretoria last week rather than what was committed to paper in the directive.

“We are committed to improving safety standards in bord and pillar mining and have brought in an international mining consultant to advise us.’

The writer owns shares in Aquarius Platinum.