Op­er­a­tions to restart when prof­itable

The Star Early Edition - - COMPANIES - Di­neo Faku

AQUARIUS Plat­inum, which has idled its Ever­est mine in Mpumalanga since June 2012 due to weak plat­inum prices, soft de­mand and high costs, has be­gun plan­ning for the pos­si­ble re­sump­tion of op­er­a­tions once the com­mod­ity price re­cov­ers.

In the lat­est an­nual re­port, Aquarius chief ex­ec­u­tive Jean Nel said re-open­ing Ever­est would help the company to restart op­er­a­tions should there be a sus­tained im­prove­ment in metal prices and a more sta­ble labour en­vi­ron­ment. The restart is ex­pected to cost be­tween $35 mil­lion and $40m (R336m to R448m).

“Ever­est will only re­sume pro­duc­tion once the board be­lieves that metal sup­ply and de­mand are health­ier and that stronger metal prices are sus­tain­able for a pe­riod of time, so as to de­liver an ac­cept­able re­turn to share­hold­ers. We are not cur­rently at that point,” said Nel.

He said the de­vel­op­ment would take 18 months and would reach full pro­duc­tion in four year’s time.

“Var­i­ous op­tions re­gard­ing ex­tend­ing Ever­est’s life of the mine are be­ing ex­plored. In par­al­lel, we con­tinue to as­sess the mer­its of com­bin­ing the as­sets at Ever­est [which has ex- cess plant ca­pac­ity] with those of other pro­duc­ers close by who have sig­nif­i­cant re­sources but limited plant ca­pac­ity.”

In ad­di­tion, Aquarius idled its 50 per­cent-owned Chromite Tail­ings Re­treat­ment Plant, and the Blue Ridge joint ven­ture.

Nel said that the fail­ure of the plat­inum price to re­spond to the end of the five-month strike, pointed to an his­toric lack of sup­ply dis­ci­pline on the part of South African plat­inum pro­duc­ers.

“While we re­main con­fi­dent in the medium- to long-term per­sis­tence of in­dus­trial and in­vest­ment de­mand for our met­als, the sup­ply sur­feit com­bined with slug­gish de­mand growth does not bode well for plat­inum price mo­men­tum in the short term.

“At Aquarius, our com­mit­ment is clear: we will not pro­duce un­prof­itable ounces; we are not in the business of min­ing for the sake of pro­duc­tion, but rather for sus­tain­able prof­itabil­ity,” said Nel.

He added: “Ul­ti­mately, we are custodians of third party cap­i­tal which in­forms our fo­cus on gen­er­at­ing share­holder re­turns and pos­i­tive cash flow”.

In Oc­to­ber, the company’s plans to boost its bal­ance sheet were dealt a blow when the $37m sale of Blue Ridge, was canned after the req­ui­site reg­u­la­tory ap­provals could not be ob­tained.

The company was ad­vised that the sale agree­ment had been ter­mi­nated as the Chi­nese led con­sor­tium which had been ne­go­ti­at­ing to pur­chase the Blue Ridge as­set had de­clined to ex­tend the out­side date. Aquarius, which op­er­ates the Kroon­dal mine in South Africa, and Mim­mosa in Zim­babwe has be­come the low­est cost un­der­ground the lo­cal in­dus­try.

The share price on the JSE at close was down 11c to R2.70.

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