Fin24

Aquarius dives on Everest mine closure

2012-06-21 10:09

Johannesburg - Aquarius Platinum [JSE:AQP] has placed its Everest mine on care and maintenance with effect from the close of business on Thursday.

The platinum miner noted that the ramp-up at Everest has encountered challenges resulting from poor ground conditions and ongoing disruptive industrial relations over an extended period and these issues, coupled with the present low platinum group metals (PGM) price environment, have rendered the mine uneconomic.

It has therefore been decided to place the mine on care and maintenance, pending better prices and improved industrial relations.

The board believes the platinum market is in an abiding surplus, with the industry generating nearly half a million ounces of unneeded platinum each year due to the current European economic crisis, among other factors.

From an operating perspective, costs continue to rise at above the rate of domestic SA inflation, while labour productivity has declined.

As a result PGM prices in both rand and US dollar terms are likely to remain stagnant for some time, and margins will remain under severe pressure across the industry.

Given these issues, the board has concluded that the only defensible strategy for any platinum producer is to cut all non-essential capital expenditure and place all non-contributing assets on care and maintenance while optimising profitable operations for maximum contribution in the current low price environment.

The group's business plan is focused on cash conservation and the preservation of the company's reserves and resources until economic circumstances merit their extraction.

Aquarius expects that operating its remaining two mines and its two tailings operations will maximise short and medium term cash flows, while the three mines currently not producing will all be maintained in a state to enable their rapid ramp up when PGM prices rise sufficiently to generate an economic return once again, and labour relations are stabilised. 

No other mine closures are envisaged within the company, it said.

Aquarius, which is also listed in London, nosedived 11.92% to R7 on Thursday morning.