JOHANNESBURG (miningweekly.com) – On the back of a year characterised by a “difficult” trading environment, Aquarius Platinum CEO Jean Nel said on Friday that the company’s report for the six months ended December 31 told a story of a “credible” operational performance “wrapped” in a challenging regulatory, metal-price and industrial-relations setting.

The London-listed producer posted a half-year loss of $24-million, or 5.11c a share, while profitability at mine level, or on-mine earnings before interest, taxation, depreciation and amortisation (Ebitda), swelled by 55% on the previous corresponding period to $10-million.

Total production from all Aquarius operations for the six months was 330 702 oz, representing a 7% increase compared with the prior comparable period, while production attributable to Aquarius over the same period increased by 7% to 168 014 oz.

“The half-year result reflects continued improvement of operational performance at all operating mines, albeit it in a difficult and lower platinum-group-metal (PGM) price environment.

“We are well aware that, despite the credible operational performance recorded in the half-year, no value was created for our shareholders and we realise that shareholders are the only stakeholders that have not benefitted from the company's activities during the period, and preceding periods,” said Nel.

Revenue for the half-year of $113-million was 2% lower, compared with the first half of the prior year, owing to lower PGM prices.
This came on the back of a PGM basket price of $1 138/oz for the period – down 9% from the previous comparable period.

While Ebitda margins improved at the North West-based Kroondal on higher production, Ebitda margins were lower at the 50%-owned Mimosa mine, in Zimbabwe, owing to lower dollar basket prices.

Total cash costs of production narrowed by $4-million to $104-million, despite an 11% increase in production at Kroondal and Platinum Mile (Platmile), on Rustenburg’s platinum belt.

Significantly, Kroondal recorded its fourth consecutive quarter in which it produced over 105 000 oz – a record for the mine.

“Despite many challenges, Kroondal is now consistently producing at levels higher than at any other time in its ten-year history, having recorded production in excess of 105 000 oz for four consecutive quarters, while recording unit cash costs at levels similar to 24 months ago,” said Nel.

At Mimosa, production remained in line with guidance, while Platmile delivered a “credible” operational performance in the half-year and would, according to Nel, have outperformed significantly had it not suffered interruptions in its plant concentrate feed during the second quarter.

Unit costs in South Africa decreased 14% to $870/oz, but increased 2% in rand terms owing to the 19% decrease in the local currency.

In Zimbabwe, cash costs narrowed a marginal 1% to $854/oz, with operating costs remaining “well within inflationary targets”.

Aquarius noted that maintaining these costs would continue to be a point of focus, particularly in the ongoing low metal price environment. 

Meanwhile, exchange rate movements continued to have a volatile effect on earnings, as the rand weakened significantly to average R10.06 to the dollar over the period.

“Our primary concern in this regard is the fact that dollar metal prices are 5% lower [compared with] the same time last year, despite the primary deficit in PGM markets during the 2013 calendar year, which is forecast to increase in 2014,” stated Nel.

Finance costs for the half-year of $15-million included $12-million of convertible notes and bank borrowings and $3-million of noncash interest, arising from the unwinding of the net present value of the rehabilitation provisions of Aquarius Platinum South Africa.

Nel further noted that the prevailing regulatory uncertainty in South Africa and Zimbabwe, as well as the precarious state of the South African industrial-relations environment, continued to make longer-term production planning and capital allocation difficult.