Aquarius Platinum South Africa (AQPSA) has entered into an agreement with a subsidiary of Anglo American Platinum (Amplats) that will increase the life of the Kroondal mine by three years to about nine-and-a-half years. Amplats would, in terms of the agreement, contribute 15.97-million tons of total ore reserves to the Kroondal mine.

This would include 9.91-million tons at 2.28 g/t of proven ore reserves and 6.06-million tons at 2.48 g/t of probable ore reserves.

The reserves are located immediately downdip of the current Kroondal mine and would be mined using the existing Kroondal underground mining infrastructure and treatment plants.

In exchange for the additional reserves, AQPSA would contribute the use of its infra-structure, continue to manage the Kroondal pooling and sharing agreement on the existing terms and conditions, sell its share of concentrate produced from the additional reserves to Amplats as an existing offtake agreement and pay Amplats a variable royalty with a base rate of R11.50/t mined.

The royalty would increase or decrease in line with movements in the rand metal price, but would range between a minimum of R8.05/t and a maximum of R14.95/t.

The deal was welcomed by analysts, with Investec Securities commenting that this was an important step forward for AQPSA’s parent company Aquarius Platinum, providing it with more “breathing space” owing to the pressures of the previous short Kroondal mine life.

Liberum Capital said this was a “solid” deal for Aquarius.

“The cost of mine extension looks acceptable at first glance, with the R11.50/t ore royalty rate reflecting just a 1% royalty rate on the value of platinum in each ton of ore mined,” it noted.

Meanwhile, Aquarius Platinum has reached a wage agreement with the National Union of Mineworkers (NUM) regarding its members who are employed at the Kroondal mine.

The mine employs about 8 120 people, including contractors. The NUM represents the majority of the mine’s Category B semiskilled workforce.

Aquarius and the NUM agreed on an increase that slightly exceeds the increase in the cost of living, as measured by the inflation rate.

The one-year wage deal would come into effect on July 1.

Negotiations in relation to the 970 skilled or Category A employees, will start in the coming weeks.

Liberum Capital commented that this was a great result and a surprise to the upside for Aquarius, which, if replicated across the broader industry, could result in a long-overdue outperformance.

“The negotiations have been concluded in a positive manner with both NUM and the South African government, which bodes well for the industry, and specifically for negotiations going forward.

“Nevertheless, we add a note of caution in regard to ongoing Association of Mineworkers and Construction Union negotiations elsewhere in the industry, where a positive resolution is yet to be demonstrated. “We expect Aquarius to see a positive response from the market today, particularly given that the general consensus was that the negotiations would not be completed without disruptive striking,” it said in a note.