Eastplats raises doubt about its status as a going concern

Eastern Platinum sounded a “going concern” warning because of large debt incurred for its chrome project, while its mining licences have come under scrutiny because of complications around mandatory black ownership levels underpinning those permits.

Eastplats, which is listed in Toronto and Johannesburg, has all its platinum group metal (PGM) and chrome assets in SA, where it halted mining at its two key operations in 2012 and 2013. It has started retreating tailings at its mothballed Crocodile River Mine near Brits in North West to extract chrome and it is investigating an option to extract PGMs, as well as potentially restarting its Mareesburg mine near Steelpoort in Limpopo.

While there is an inflow of revenue for the first time in years, the company has heavy care and maintenance costs that erode that income. Eastplats is entirely dependent on a single company called Union Goal Offshore Solution as the sole buyer of its chrome for its revenue.

“Despite the continued rampup of the retreatment project, there remains material uncertainty that the company will be able to achieve sufficient cash inflows to meet its expected obligations in the next 12 months,” Eastplats said in its interim results to end-June.

“There can be no assurance that additional funding will be available to the company when needed or, if available, that this funding will be on acceptable terms. These factors raise significant doubt about the company’s ability to continue as a going concern.”

With nearly $16m of revenue, Eastplats reported a significant drop in its post-tax loss to $2.2m from $5m the year before. It spent $3.6m on care and maintenance in the period.

Looking at the numbers on a quarterly basis, Eastplats recorded a profit of $382,000 against a second quarter loss of $4.2m the year before.

A worry for Eastplats is a $40m longer-term contract, up from $35m at the end of December. It relates to a transaction with Union Goal to build the chrome extraction plant.

Cash holdings fell to $1.9m from $4.2m at the end of December. Eastplats noted a sharp kick-up in trade and receivables of $9.7m compared to $1.3m at the end of 2018 because of delays in collecting what was due to it.

“Management have received assurances of continued collections but further delays in the collection of the accounts receivable from Union Goal would create significant operating pressures on the company,” Eastplats said, without giving the reasons for the delay.

Of equally pressing concern is a spat around empowerment shares, which could lead to the black ownership of Eastplats falling below 26%.