JOHANNESBURG (miningweekly.com) – Johannesburg-listed Aquarius Platinum, which has not been directly impacted by the labour strikes sweeping the sector, produced 160 014 oz of platinum-group metals (PGMs) in the first three months of the year, beating its quarterly guidance but narrowing output by 4% quarter-on-quarter.

The reduction in production for the quarter came off record levels of production experienced at the group's mines and also took into account “very low” production at Platinum Mile (Platmile), Aquarius' tailings retreatment plant, which received its feed ore from Anglo American Platinum’s (Amplats’) strike-hit operations.

“As a result of the strike, the Platmile operation has received no feed from Amplats and it is not possible to draw any meaningful comparison with the results of the previous quarter. The cash costs numbers are also materially distorted because of very low feed and production volumes.

“It should also be noted that the fourth quarter’s production will also be impacted by the strike action which at the time of this release was still ongoing,” the company said in a results statement on Tuesday.

Despite describing Aquarius’ third-quarter operational performance as “competent”, CEO Jean Nel noted that the group’s 50%-owned flagship Kroondal mine, in the North West, recorded 107 818 oz of PGM output for the three months ended March 31 – not only its highest-ever production for a third financial quarter but its fifth consecutive quarter in excess of 105 000 oz.

PGM output from the group’s 50%-owned Mimosa mine, in Zimbabwe, remained in line with guidance, with production decreasing by 7% to 51 907 oz quarter-on-quarter owing to challenges experienced after the February 2014 plant shutdown.

Cash costs at Kroondal remained below inflationary targets, but increased 9% quarter-on-quarter to $866/oz, while, similarly, cash costs at Mimosa increased by 7% to $892/oz over the period.

DECENT GAINS

Commenting on the overall PGM market, Aquarius stated that the average third- quarter platinum price posted a decent gain of 2.3% to $1 157/oz, despite a reasonable degree of volatility over the period as a result of the supply losses caused by the widespread labour strife in South Africa.

“While platinum has performed well, it was outperformed by palladium among the PGMs, given that palladium prices have recently reached their highest since 2013. Against the dim supply backdrop, South Africa-listed palladium exchange-traded product (ETP) holdings continued to build throughout the third quarter, with two funds having been launched in March, while platinum ETP holdings have continued to scale all-time record highs,” Nel explained.

Further bolstering the price of PGMs over the quarter, China’s automobile sales grew 17.8% year-on-year in February, after a weak January that was likely affected by the Chinese New Year holiday.

In the US, February automobile sales also represented an improvement compared with January, with a consequent firming up of the underlying demand for autocatalytic converters providing support to PGM prices during the quarter.

Aquarius recorded an on-mine earnings before interest, taxes, depreciation and amortisation (Ebitda) profit of $11.1-million for the quarter, representing an increase of $7.3-million, or 190%, compared with the prior quarter.

Revenue for the quarter was $60-million – 13% higher than the previous quarter, following higher metal prices, while the company posted a profit for the period of $161 000.

PRIMARY RISK

At a corporate level, during the quarter, Aquarius finalised “the mechanics and terms” of the restructure of its balance sheet, which would see the platinum company buying back between $150-million and $225-million of its $300-million convertible bonds due on December 18, 2015.

The settlement of this tender offer for Aquarius’ convertible bonds would be funded by proceeds raised by a proposed rights issue of new common shares in the company valued up to $225-million.

“The board is particularly encouraged and appreciative of the level of support from our largest shareholders who have indicated their support for the restructure,” the group noted.

“Aquarius will carefully assess the merits of pursuing a number of smaller, incremental growth initiatives aimed at increasing production and lowering unit costs,” it said.

The company would also continue to focus on building sound relations with its workforce and organised labour representatives to maintain stability, but cautioned that its South African operations were not isolated and the risk of industrial action remained a primary one.