[miningmx.com] – A $88m write-down of mothballed Everest mine took Aquarius Platinum’s total impairments for the 2013 financial year to $226m, enough to see a total loss after exceptional items of 61 cents per share.
However, the second half performance provided grounds for optimism for the platinum miner which had closed mines, converted to an owner-operator model, and suffered the effects of industrial action, as well as regulatory uncertainty in the 12 months under review – surely its toughest to date.
Pre-tax earnings from January to June came in at $48m compared to the $22m earned before tax in the first half of the financial year.
Jean Nel, CEO of Aquarius Platinum, said it was a financial year of two differing halves, but despite ending the period on a high note, said there was work to be done. For instance, he has targeted a 30% to 40% reduction in corporate costs in the current financial year.
There were also some major decisions to be made including how to tackle at $300m corporate bond due for repayment in 2015, and whether to bring the curtain down on Everest mine or seek a way of extending its life and maintaining resource optionality.
The bottom line, however, was cash preservation, said Nel. “In essence we are going to focus on operational improvements and cash preservation. This will intensify, if anything, in the current financial year,” he said at the group’s full-year presentation.
Heartening for Nel is the fact that the company grew its cash in the second half of the year by about $20m reporting a cash balance of $103m at year-end. This is $77m lower than in the previous financial year.
Nel said there were no definitive plans for dealing with the corporate bond but he nonetheless sketched some scenarios which focused on the possibility of using cash generated internally to settle at least part of the bond.
“Foremost in our minds is the fact that at a coupon rate of 4%, the instrument we have is better than debt raised by other corporates. So we’re in no rush,” he said. In July, AngloGold Ashanti said it had raised $1.25bn at a coupon rate of about 8.5%.
“We have cash on the balance sheet that we don’t need and even at forecast [PGM] prices we can extend the debt or refinance it,” Nel said.
Commenting on the prospects of Aquarius Platinum’s Everest mine, which has been put into mothballs at a cost of $4m to $4.5m a month, Nel said the company was weighing up whether its life of mine could be extended either by adding resources contained in adjacent property owned by the company, or land owned by other entities in the vicinity.
“We’re grappling with the fact that it has a five-year life-of-mine (LOM) but that to open it up would cost between $25m to $30m whereafter we have to continue with stay-in-business capital. That makes no sense at the current [PGM] price.
“But we are looking at the permutations to extend the LOM. We’re not sure on the permutations yet,” he said. Everest needed a LOM of about 10 years in order to make a decent return on investment, he said.
Aquarius Platinum has a 50% stake in Mimosa Platinum, a company that operates at a good margin in Zimbabwe. The country’s president, Robert Mugabe, was recently returned to power for the sixth consecutive term raising the prospect he would make good on threats to expropriate shares in mining businesses operating there.
Nel declined to comment explicitly on indigenisation but said that a decision to reinvest in Mimosa – which would require $80m over a three-year period – had to be made by about 2015/16. Failing to reinvest in Mimosa would mean that its mine would be exhausted in about six years time, he said.
