Amid global platinum prices languishing at six-year lows of some $980/oz, South African producer Aquarius Platinum is looking to its neighbours in the platinum belt for possible operational synergies that could ease production costs as it rides out the depressed market fundamentals.

Telling investors last week that simply operating in a disciplined manner was not enough to ensure sustainability and generate returns in the current environment, CEO Jean Nel outlined the group’s strategy to appeal to nearby platinum operations to investigate the sharing of mine infrastructure and other cooperative measures.

“Operators should continue to talk to each other more aggressively, [as] we don’t have a metal price environment in which companies can operate in silos.

“The current dollar prices are simply unsustainable and, if they prevail, primary supply will drop, as it’s just not viable for the sector to continue to produce [at these levels]. I’ve been saying this for some time,” he said last week during a conference call to discuss the company’s results for the year ended June 30.

COO Robert Schroder added that such collaboration could see the sharing of both above- and below-ground infrastructure and was a signal to Aquarius shareholders that the company would not simply continue with its business-as-usual approach amid falling platinum prices.

“We’re telling the market that we know that metal prices and the market are tough and we’re not just going to carry on [anyway],” he asserted.

Aquarius, which posted a narrowing of earnings before interest, taxes, depreciation and amortisation to $26-million and a 9% slump in revenue to $213-million for the period, was also assessing the viability of each of its shafts across the Kroondal and Mimosa operations.

The company was not, however, considering placing any of its shafts on care and maintenance but was rather considering redesigning certain operational aspects, such as shift systems, to reduce overall production costs, Schroder advised.

“Each operation has to be sustainable and we won’t just continue to mine through the site, while burning cash,” said Nel, reporting a net loss for the company of $98-million, or $0.65 a share.

Lifted Ounces
Group attributable production increased by 5% to 349 426 platinum group metal (PGM) ounces for the year, despite the impact of the 2014 strike on the PlatMile operation, with both Kroondal and Mimosa delivering record production over the 12 months.

This after the Kroondal reserves were increased by a further 4.8-million tons following an agreement with Anglo American Platinum.

On-mine unit cash costs in South Africa increased by 1% in rand terms year-on-year, while Mimosa continued to produce at capacity but was impacted on by a low PGM dollar price.

On-mine unit cash costs at Mimosa decreased 9% to $803/oz, compared with the prior year, while production at PlatMile increased year-on-year but remained hampered by lower feed supply and a $28-million impairment charge.

“During the year, the Kroondal workforce maintained a positive outlook with open communication channels on all levels. A recognition agreement was concluded with the Association of Mineworkers and Construction Union (AMCU) in early January.

“Negotiations were conducted in a mature manner, which management would like to commend AMCU for,” the company noted in a statement.

Disposal of the company’s Kruidfontein mining rights and Everest mine raised a further $60-million in cash for the company and resulted in a closing cash balance for the year of $196-million.

A further $5-million was attributable to Aquarius in joint venture entities.

Project Eye
In the year under review, Aquarius also completed the prefeasibility study investigating the expansion of the Mimosa mine by 25% and was currently undertaking a bankable feasibility study that was due for completion by February.

It had also recently received formal confirmation from the Department of Water and Sanitation (DWS) that the technical specification submitted by the company in relation to the Kroondal tailings retreatment project had been approved.

The group now expected the issue by the DWS of an appropriate integrated water-use licence (IWUL).

“Upon receipt of the IWUL, Aquarius will update the relevant cost and capital assumptions and advise shareholders accordingly.

“Importantly, Aquarius will take into account the prevailing and forecast metal price environment and balance sheet strength before it commits any capital to projects,” the miner cautioned.

Nel added that, while the group would continue to assess project development, there would be “no growth for the sake of production level growth”.

“A project will only be pursued if it reduces overall group production unit cost, has a relatively low capital expenditure requirement and leverages off existing group infrastructure to reduce cost and risk,” he reasoned.

Aquarius expects to produce 690 000 oz of PGMs in the 2016 financial year.