VANCOUVER (miningweekly.com) – Black economic empowered platinum group metals (PGMs) company Atlatsa Resources has confirmed that its 51%-owned Bokoni platinum mine, in South Africa, was placed on care and maintenance on October 1, as part of an Anglo American Platinum- (Amplats-) backed restructuring agreement.

The TSX- and JSE-listed company on Monday noted that various attempts, since 2014, to restructure the Bokoni operation had been unsuccessful in returning the mine to positive cash flow.

“Given Bokoni mine’s current operational challenges, continued operational losses and negative cash generation, the depressed PGM environment, the negative medium-term PGM pricing outlook and the Atlatsa group’s significant debt levels, attempts to implement such alternatives have proven unsuccessful,” management stated in Atlatsa’s overdue financial statements for the second quarter ended June 30.

The company had been in TSX filing default since agreeing to the financial restructure plan with Amplats early in July.

Under the terms of the restructuring agreement, the first phase of which saw the Bokoni mine being idled on October 1, with Amplats funding all costs associated with the care-and-maintenance process up until December 31, 2019, Amplats has also suspended servicing and repayment of all current and future debt owed by the Atlatsa group until the same date.

Meanwhile, the parties are busy with satisfying conditions precedent for the second phase of the restructuring plan that will see Amplats acquiring the resources specified in the Kwanda North and Central Block prospecting rights for C$29.8-million in cash. Subject to closing this asset disposal by Atlatsa, Amplats will capitalise and/or write off all debt owed by the Atlatsa group, directly or indirectly, to Amplats.

Importantly, the Phase 2 deal will see Atlatsa and Amplats retain their 51% and 49% respective shareholdings in the Bokoni mine, through Bokoni Holdco.

Atlatsa expects to book an impairment charge of C$176.2-million regarding property, plant and equipment and capital work-in-progress.

WIDENED LOSSES
During the three months ended June 30, Atlatsa incurred an operating loss of C$192.6-million and a loss before tax of C$200.3-million, up from losses of C$18.8-million and C$25.8-million for the same quarter of 2016. The after-tax net loss amounted to C$192.7-million, compared with a net loss C$24.1-million for the second quarter of 2016.

As at June 30, Atlatsa had negative working capital, excluding restricted cash, of C$98.4-million, compared with negative working capital of C$21-million at June 30, 2016, and negative working capital of C$65.2-million at December 31, 2016.

Atlatsa has total debt obligations owing in the next five years totalling C$362.7-million, of which C$96.1-million is due within 12 months, C$217-million is owing in one to three years, and C$49.6-million is due between three to five years.

Atlatsa currently has C$24.9-million available under its debt facilities, with the total drawn amount being C$337.2-million.

The Bokoni mine’s output averaged 102 727 t/m of ore from its upper group two and Merensky reef horizons (including tonnes from the Klipfontein Merensky opencast mine that were stockpiled), representing a 10.6% decrease from the second quarter of 2016. The Bokoni mine’s earnings before net finance costs, income tax, depreciation and amortisation widened from negative C$2.9-million to a negative C$5.4-million.

Revenue totalled C$45.8-million for the second quarter, compared with C$40.7-million for the same period a year earlier, representing a 12.6% increase.

Atlatsa’s platinum, palladium, rhodium and gold (4E) PGM output fell 9.8% in the quarter to 37 594 oz, compared with 41 698 oz produced a year earlier.

The 4E basket price for the second quarter was 6.3% higher at R11 968, as compared with R11 256 for the same period in 2016. The average platinum price of $941/oz during the quarter was 6.3% lower compared with $1 004/oz a year earlier.

Industry observers have noted that platinum fundamentals are set to remain challenged until South Africa's producers cut supply. Meanwhile, palladium prices have been trading above those of platinum, and this is not believed to be sustainable, as discussions over a possible substitution between the two metals in autocatalysts will likely gather pace.