Amplats, Atlatsa to mothball Bokoni

Atlatsa Resources and Anglo American Platinum have finally lost patience with the poorly performing Bokoni mine, putting it into care and maintenance as part of a deal that will entail writing off R4.2bn in debt to the junior miner.

Atlatsa Resources and Anglo American Platinum (Amplats) have finally lost patience with the poorly performing Bokoni mine, putting it into care and maintenance as part of a deal that will entail writing off R4.2bn in debt to the junior miner.

After years of failed efforts to restructure the mine to be sustainably profitable and the financial assistance of the Anglo American 80%-held subsidiary, the Bokoni mine recorded R500m of cash outflow in the first six months of 2017.

“In the circumstances, the Bokoni joint venture partners are no longer able to continue funding losses … with no reasonable short- to medium-term turnaround prospects,” Atlatsa told investors after suspending its JSE-listed shares.

Atlatsa had already cut more than 1,600 jobs at Bokoni in 2016, leaving 4,000 employees who will now be out of work. An analyst said the mothballing of the mine was overdue and showed how difficult the environment was for platinum mining companies when platinum prices were roughly at the same levels they were a decade ago.

Input costs have nearly doubled in that time.

The financial setbacks in the first half of 2017 prompted Atlatsa, the Toronto- and JSElisted 51% owner of Bokoni and Amplats, the 49% owner, to investigate various options for the mine, which generated about 160,000oz of platinum group metals in 2016.

“All of the options assessed demonstrate significant cash outflows in the short to medium term with material execution risk,” Atlatsa said.

Amplats has agreed to a suspension of interest payments and repayment of R4.2bn of current and future debt, which will include the cost of putting Bokoni into care and maintenance, until the end of 2019.

Atlatsa also planned to restructure its head office and cut associated overhead costs to right-size for a business that would hold a single asset on care and maintenance, “including reviewing the sustainability of its listings on various stock exchanges”, Atlatsa said.