JOHANNESBURG (miningweekly.com) – Midtier platinum-miner Aquarius Platinum, which swung from a loss to a net profit of $27,8-million in the 2010 financial year, plans to increase its attributable platinum-group metals (PGMs) output by 25% to 530 000 oz in the 2011 financial year.

Of the total attributable ounces, the Marikana mine would produce about 80 000 oz of PGMs, the Kroondal mine between 220 000 oz and 230 000 oz of PGMs, the Everest mine 120 000 oz of PGMs and the Mimosa mine, in Zimbabwe, 100 000 oz of PGMs, CEO Stuart Murray said in a conference call on Thursday.

In the financial year ended June 30, 2010, the group’s attributable production, including the 29 304 oz of PGMs produced at the Blue Ridge mine, amounted to 422 645 oz of PGMs.

This was despite the fact that the Everest mine had been closed for the majority of the financial year, contributing only 8 496 oz of PGMs to the overall output.

Output was, however, still 7% down on the 455 740 oz of PGMs produced in the 2009 financial year. This included 64 068 oz of PGMs produced by the Everest mine before it was closed in December 2009.

Murray noted that the Everest mine had successfully been restarted.

Phase two of the re-establishment project at the mine had been 95% complete by the end of the financial year, while the establishment of permanent underground services, the reclamation of infrastructure and the equipping of declines and strike sections had been completed.

The processing plant had also been recommissioned by May.

Murray said that the mine would ramp up to produce 120 000 oz of PGMs in 2011 and is expected to produce about 180 000 oz of PGMs in 2012.

At steady state production, Everest would produce between 190 000 oz/y and 205 000 oz/y of PGMs.

The Kroondal and Marikana mines reported lower output in the financial year, as industrial action in August 2009, impacted on production.

Output at the Kroondal mine fell by 3% to 408 570 oz of platinum, palladium, rhodium and gold (4E) PGMs, of which 204 285 oz were attributable to Aquarius.

At the Marikana mine, total PGMs output fell by 14% to 135 418 oz of 4E PGMs, of which 67 709 oz was attributable to Aquarius. Underground production at the mine had also been negatively impacted on by geological losses caused by the intersection of potholes, particularly at the M4 shaft.

Murray noted that, as a result of the mining method changes it would have to implement at the Marikana and surrounding mines, its estimates were that on mine cash costs would likely rise by about 5% on current cash costs.

The group was still assessing and finalising the cost impact and would provide shareholders with more details at the end of the first quarter of the 2011 financial year.

Following the death of five contract workers at the Marikana mine, in early July, the Department of Mineral Resources issued a safety directive related to mechanised bord-and-pillar mining methods in North West province.

Meanwhile, Murray noted that the Mimosa mine, in Zimbabwe, had continued to perform “exceptionally well”, with production up 11% to 199 625 oz of 4E PGMs, of which 99 812 oz were attributable to Aquarius.

A significant issue with the Zimbabwean mine was, however, rising cash costs.

Murray explained that with the move towards a multicurrency regime in Zimbabwe, the cash costs a unit had increased by 22%. Input costs were now in line with that of equivalent services rendered in South Africa.

The increased cash costs had eroded the competitive advantage of the mine to some extent, he stated.

Further, mineral royalties in the African economy had also been increased to 4,5% on gross PGMs output, up from an initial 2,5%, while the corporate tax had been increased to 25%, from 15% previously.

Aquarius had spent $18-million in capital expenditure at Mimosa during the year, with the majority of funds having gone towards the completion of the Wedza phase-five expansion at the mine.

Murray said that the group was currently working on a prefeasibility study for a phase-six expansion project, which would entail a new decline and expansion of production of about 50% to 75% on current output levels.

Aquarius could not yet give a capital cost estimate for this expansion, with Murray saying that the group would also have to get more certainty about the operating, financial and political regime in Zimbabwe, before it could take a decision to proceed with the project.

BLUE RIDGE

Meanwhile, Murray reported that Aquarius would need to spend an additional $20-million, as its share, on implementing a revised life-of-mine business plan at its 50%-owned Blue Ridge mine.

The mine, which is a 50:50 joint venture (JV) with Imbani Platinum, had started off well, but Murray said that its on-site stockpile had turned out to be smaller and not as high-grade as had been anticipated when Aquarius had bought the mine.

The company had since had to abandon the use of the originally planned mining concept set out in the mine’s development model, which had impacted on its ability to handle waste and rock underground and to maintain reasonable grades.

A fundamental redevelopment programme was now planned for the mine, with improvements to be made in terms of mine access, ore and waste mass flows.

The project would be undertaken over a ten to 12 month period, and would include the closure of the mine for seven months to do underground development.

Aquarius was still discussing the redevelopment programme with its JV partner.

The plan was to ensure that when reopened, it would be a bigger mine with a higher capacity of 160 000 t/m, to produce an equivalent of 140 000 oz/y of 4E PGMs.

Previously, the mine was expected to produce about 120 000 oz/y of 4E PGMs at full output.

Murray noted that the $20-million it planned to spend was in addition to the R300-million that had already been committed to developing the mine.

The JV partners were also expected to contribute their share of the expenditure on the redevelopment of the mine.

FINANCIAL RESULTS

Aquarius Platinum recorded a net profit of $27,8-million in the 2010 financial year, up from a net loss of $81,6-million recorded the year before.

Revenues were up 52% to $472,2-million in the 2010 financial year, compared with the $310,6-million earned the year before.

The group also ended the year with a cash balance of $381-million, with Murray noting that the group was in a much better cash flow territory than it had been in 2009.

He added that the group would hold on to its cash balance as a “war chest” for sensible strategic activity and as a buffer in the event of another economic downturn.

He said that while there had been a lot of euphoria towards the end of its financial year that the South African platinum industry was getting properly back on track, the last six to eight weeks had seen the rand receipts of South African PGMs companies fall by 7%.

Further, rand receipts were down by 20% on the peak reached in May, which Murray warned would not bode well for the future profitability of the local PGMs industry.

Something would have to give, he stated, noting that this would have to be the PGMs price, the rand exchange rate or a potential curtailment on the supply side.