Share

Not as easy as it looks

With the acquisition of Booysendal South for R1,2bn in cash, Stuart “King Rat” Murray – CEO of Aquarius Platinum [JSE:AQP] – has just underscored why he deserves that nickname. By way of contrast, the operating and financial problems knocking Eastern Platinum [JSE:EPS] (Eastplats) and Anooraq Resources Corporation [JSE:ARQ] (Anooraq) again highlight the platinum business is a tough nut to crack.

Murray famously described the platinum business as consisting of “three 600 pound gorillas and a whole lot of rats and mice, of which we like to think of Aquarius as King Rat”. The “gorillas” are Anglo American Platinum (Angloplat), Impala Platinum (Implats) and Lonmin.

Booysendal used to belong to Angloplat, which shifted it into Northam Platinum as one of a number of black empowerment deals the group carried out to achieve conversion of its extensive “old order” mining rights.

Not only does Everest offer the cheapest and most efficient way into Booysendal South but acquiring it removes one of the biggest investor concerns hanging over Aquarius – its lack of longer-term resources. Booysendal South contains 31,3m oz of platinum group metals (PGMs), which increases Aquarius’s current resources base by around 24%. Throw in the other resources acquired around Rustenburg through the recent Afarak transaction and Aquarius’s resources base will become almost 50% larger.

As RBC Capital Markets analyst Leon Esterhuizen puts it: “Short life? What short life?” He calculates Aquarius has spent “roughly 11% of its market capitalisation to expand its resources base by a full 50%. All of that without issuing a single share.”

Sadly, things aren’t going anywhere near as well for Anooraq and Eastplats. Anooraq is currently being bailed out financially by “big brother” Angloplat, which can’t afford to let it fail because it’s one of the pillars of the group’s empowerment strategy, in terms of which it achieved conversion of its old order mining rights. Angloplat has bought up the R671m that Anooraq owed to various banks, so it now holds Anooraq’s total debt burden of R2,5bn.

Anooraq corporate development executive Joel Kessler says it was made clear in 2009 the deal with Angloplat was a highly-leveraged transaction using expensive debt, because it was negotiated at the height of the global financial crisis.

In its March 2011 quarter Anooraq reported a 28% drop in PGM production compared with its December quarter and a loss before tax of US$39,1m. Market speculation is Anooraq is going to sell some of its assets back to Angloplat to cancel out its debt. Kessler declined to comment.

Eastplats also had a dreadful March quarter – but for different reasons. Production from its Crocodile River Mine near Brits dropped 22% to 25,387oz (December quarter: 32,752oz). Reasons were the traditional slow start-up of mining operations after the Christmas break, combined with radical changes to the underground mining support systems due to pressure from the Department of Mineral Resources (DMR).

Eastplats made a loss of $5,6m and, worryingly, reported rising tensions with its workforce linked to wage negotiations currently under way.

Ryan holds shares in Aquarius Platinum. 
We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.89
+0.2%
Rand - Pound
23.84
+0.3%
Rand - Euro
20.38
+0.2%
Rand - Aus dollar
12.31
+0.2%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders