TORONTO (miningweekly.com) – Canadian platinum group metals (PGM) producer Atlatsa Resources has swung to a first-quarter net profit of C$565 000, or nil per share, despite lower output as the company was implementing a restructuring in order to better cope with stubbornly low PGM prices.

The financial performance for the three months ended March 31 was an improvement over the net loss of C$16.8-million, or C$0.02 a share, recorded in the previous financial year.

The TSX- and JSE-listed company’s flagship Bokoni mine, in South Africa’s Limpopo province, produced 36 609 oz of platinum, palladium, rhodium and gold (4E), down 14.6% year-on-year as the production tonnes milled fell 14%.

The UM2 and Vertical Merensky shaft operations were placed on care and maintenance in August and December last year and, on September 16, the company announced that, together with partner Anglo American Platinum, it would implement an operational and financial restructure plan at Bokoni to ensure its future viability.

During the first quarter, revenue had decreased by 32% quarter-on-quarter to C$35.6-million, mainly as a result of the 14.6% decrease in 4E PGM output. In South African-rand terms, the PGM basket price decreased by 2.3% from R11 569 in the first quarter of 2015 to R11 305 in the first quarter of 2016, while the average US-dollar platinum price decreased by 23.5% from $1 194/oz to $914/oz in the first quarter this year.

Total cash operating costs were 31.1% lower, reflecting the decrease in tonnes milled as well as cost-saving measures. Despite overall tonnes milled decreasing, underground tonnes from the two remaining shafts were up by 16%, which offsets the decrease in cash operation costs.

Atlatsa advised that primary development at Bokoni had decreased by 44.9% quarter-on-quarter to 1 210 m, owing to the impact of restructuring, as well as Section 54 stoppages that were imposed by the Department of Mineral Resources after two fatalities took place at Bokoni during the first quarter. More emphasis had been placed on secondary development to increase face length available for mining.

Primary development at Bokoni was expected to be sufficient to meet the requirements of the approved restructure plan, the company stated.

Recoveries at the concentrator plant decreased by 1.9% to 87.5% and stayed constant at 86.3% for the Merensky and UG2 concentrate, respectively, as a result of an increase in throughput and the processing of lower-grade ore from the opencast operation.

MINE RESTRUCTURING
As a result of its restructuring plan, Atlatsa said that Bokoni had issued a Section 189 (3) notice to relevant parties under South African labour relations laws and that a retrenchment agreement was signed by all recognised labour unions on February 8. Bokoni’s labour force was reduced by 38.3% from 6 348 as at March 31, 2015, to 3 917, at the end of the first quarter. The reduction was made up of a 62.5% decrease in contractors and a 19.5% decrease in own mine employees, the company stated.

At the end of the current quarter, implementation of the restructure plan was well advanced and was expected to be fully complete by the end of June. To date, on base cost calculated from August 2015, operational costs were reduced by an average of 15% a month, which was achieved by the significant reduction in the labour force, Atlatsa stated.

On completion of the restructure plan and the current ramp-up phase of the Brakfontein Merensky and Middelpunt Hill UG2 shaft operations, Bokoni was expected to be better positioned from both a unit cost and cash flow perspective, as it would operate from two shaft complexes instead of the current four-shaft system, thereby reducing costs associated with logistics and support services.

Further, Bokoni would reduce its total operating costs by moving from older, inefficient, higher-cost operations to new generation, more efficient and lower-cost shaft operations. It would also be able to access higher-grade Merensky mining areas at its new generation Brakfontein shaft complex, reduce overall sustaining capital expenditure at its new-generation shaft complexes, and significantly reduce its project capital expenditure.

The Bokoni mine remained an operation in development with its key Brakfontein Merensky and Middelpunt Hill UG2 underground development shafts remaining in their ramp-up phases, on target to achieve planned steady-state production by the fourth quarter of this year and by 2019, respectively, the company advised.