By John Harrington
Date: Thursday 21 Jun 2012
Recent trading updates from Aquarius Platinum have contained lengthy diatribes about the difficulties of running a mining business in Africa, but with the announcement of the mothballing of another of its mines, it is clear the company is not just having a whinge.
A mere 10 days after the platinum miner said it was halting operations at its Marikana mine in South Africa, the company said it has placed its Everest mine into care and maintenance mode, pending better prices and improved industrial relations.
The Everest mine is located on the southern portion of the eastern limb of the Bushveld Complex near the town of Mashishing, in the province of Mpumalanga, South Africa.
Aquarius's shares took a tumble after it announced the decision, which had been prompted by challenges resulting from poor ground conditions and disruptive industrial relations over an extended period. These issues, along with the present low platinum group metals (PGM) price environment have made the mine uneconomic, the company said.
"The board is of the view that 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," the company statement said. That being the case, it is small wonder that the company's share price has tanked by four-fifths over the last year.
"From an operating perspective, costs continue to rise at above the rate of domestic South African 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," Aquarius warned.
Cash conservation is now the name of the game at Aquarius, as it battens down the hatches until a sunnier economic climate arrives.
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 - Everest, Marikana and Blue Ridge - 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.
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