JOHANNESBURG (miningweekly.com) – Canada-based platinum miner Eastern Platinum (Eastplats) on Monday said it would suspend funding for its South African Crocodile River mine (CRM) development plan, owing to the continuing negative outlook in the global economic environment, the sustained weakness in platinum-group metals (PGM) pricing and the current operating environment in South Africa.

The company indicated that it would continue to reassess the viability of production at the CRM and reinitiate funding for production once conditions supported such a decision.

Eastplats stocks listed on the Toronto Stock Exchange slipped by 22.73% on Monday, to close at C$0.085 apiece.

Eastplats noted that its decision was motivated by a range of micro- and macroeconomic challenges, including the 2008 financial meltdown that resulted in a reduction in European car sales and, in turn, a fall in platinum demand, which showed no signs of a near-term recovery. Adding to the turmoil was that year-on-year European car sales had declined monthly since October 2011.

Further, the costs per ton milled at CRM, had risen by 82% since the beginning of 2007, while the PGM basket price had fallen by 17% in rand terms over the same period. Ongoing labour unrest also continued to negatively impact on productivity throughout the South African mining sector.

The miner stated that, when taken together, the impact of a stagnant commodity market, the rising costs of mining and decreasing productivity have resulted in it becoming increasingly difficult to justify the continued level of funding required for the CRM development plan.

“Given the stagnation of the European car market together with a continuing resistance to any significant large-scale production cuts from the larger producers, we expect that the industry will have to contend with much lower metal prices than previously projected in the short and medium term,” Eastplats warned.

Meanwhile, ongoing cost pressures and decreasing productivity in South Africa continued to significantly reduce free cash flow.

“After a considerable amount of review and evaluation, Eastplats sees no merit in depleting the financial resources of the company in this economic and operating environment,” president and CEO Ian Rozier stated.