HomeGoldAquarius to focus on exploration and M&A

Aquarius to focus on exploration and M&A

As a part of Aquarius Platinum’s strategy of further growing its impact on the platinum industry in South Africa the company is concentrating on M&A opportunities, plus several promising exploration ventures.

Aquarius is a focused platinum group metals (PGM) producer in Southern Africa with a primary listing on the London Stock Exchange, plus listings on the ASX and the JSE and a Level 1 ADR in the United States.

The company has interests in six operations on the world-renowned Bushveld Complex in South Africa and the Great Dyke in Zimbabwe. This involves the Kroondal, Marikana and Everest mines in South Africa, the Mimosa mine in Zimbabwe, and two tailings interests in South Africa – one called CTRP and the other known as Platinum Mile.

The six operations are at various stages of working up to an eventual combined total annual production of more than one million ounces, of which close to 700,000 ounces will be attributable to Aquarius. Life of mine of the six operations varies between ten and 30 years.

Aquarius results for the 2009 financial year ended 30 June 2009 were scheduled for release as we went to press with this issue, but the company achieved attributable production 97,212 PGM ounces at its six Southern African operations in its third quarter to the end of March. This is a solid performance despite 10 fewer shifts (14%) in South Africa, and the temporary suspension of operations at Everest Mine.

Kroondal MA1

Aquarius Platinum’s Kroondal
plant at night.

Production in quarter 1 and quarter 2 had amounted to 128,366 and 131,843 PGM ounces respectively, giving an overall total of 357,421 PGM ounces for the first three quarters of the 2009 financial year. Output for the full financial year is estimated at a maximum of 480 000 ounces, compared with the initial guidance of 580,000 ounces.

“Looking ahead, we are working on M&A opportunities right now, but typically these would be provided for through the issue of shares rather than cash,” Aquarius investor relations manager Nick Bias says. “Our capital expenditure for maintenance is holding at about US$45 million a year, and there are no expansion plans right now. This is not surprising, given the current global economic environment,” he tells Mining Review Africa.

“One opportunity we are finalising right now is at Firstplats. This involves some ground adjacent to the Marikana mine,” Bias says. “We would need to spend some shares to acquire Firstplats, but in return we would see an increase in mine life. It might be small, but it is a fantastic common sense transaction, typical of what you see from Aquarius,” he adds.

“A further benefit is of course that, because Marikana is a pool-and-share project with Anglo Platinum, they will have to contribute something too. They are looking at contributing some land at Kroondal, which would add another two years of life to that operation.

“We have been working hard at the M&A aspect for some time now and, without going into details, I am excited about what is happening,” Bias emphasises. “The global downturn is impacting negatively on PGM prices, and combined with a strong rand, this is placing severe pressure on the juniors. As a producer with a good balance sheet and positive cash flow this provides us with multiple opportunities,” he says.

“Looking to the markets for our metals, since we last spoke late last year, the jewellery market has really improved. With prices having fallen as low as they did at the end of last year, we anticipated a strong revival in jewellery demand, which came to fruition in January,” Bias explains. “With the low price of platinum we have seen the market revive, together with some switching back over to platinum. This has been extremely strong in China,” he adds.

Kroondal MA2

The plant and mills at Kroondal.

“The June on May statistics are weaker than the June on June last year statistics. The pace has slowed down, which is typical as we move into the high summer months, but I would expect a significant uplift in demand for platinum in September as we head for the Christmas period,” he predicts”.

Bias goes on to say that investment demand has also increased. “Although platinum is more generally thought of as an industrial metal, people are looking to diversify their investment portfolios of gold and silver.

“Against this background, Aquarius has done pretty well, considering that the rest of the industry is moving the other way,” Bias says. “The reasons for this are, first of all, a huge focus on cost, and secondly smooth running operations now that we have resolved the industrial relations issues which plagued us in the previous year.”

An additional factor was the Everest problem, with the mine suffering instability in the main decline after periods of intense rainfall, and the subsequent temporary shut-down of the mine. As a consequence Aquarius has deferred all planned Everest production from November last year.

“To be frank, the industry has not been making a lot of money, and we were comfortable to delay a production restart until prices recover and we can achieve a better margin than that offered by today’s prices,” Bias explains. “All that said, we have started the excavations for the box cuts for two new declines to complete that process before the rainy season starts. While production will not start immediately, at least we will have the opportunity should metals prices suddenly increase,” he adds.

“I would not consider Everest as being part of the production effort until the 2011 financial year, in other words from July 2010 at the earliest,” Bias says.

“The other reason is of course that we are in the process of completing the acquisition of Ridge Mining, which comprises two Eastern Limb projects. Our priority there is to get the Blue Ridge project up and running and ramped up to full production, and only then will we turn our efforts to bringing Everest back into production.

“Ridge is a small, low-grade deposit with difficult geology, and that is exactly what Aquarius is all about – applying the Aquarius mining methods to turn those difficult orebodies into industry leaders in terms of margins,” Bias continues. “In addition, the Blue Ridge mine has a l9 year life in terms of its numbers, with some very interesting adjacent exploration that could increase the life even further.

Kroondal MA3

Underground at the workface.

“It also comes with a very sizable exploration project called Sheba’s Ridge, which is a nickel-PGM project. I’m not sure that Aquarius has the wherewithal to develop this prospect, but it would certainly present optionality in terms of trading with other companies in the PGM and nickel arena,” Bias points out. “It is a project with interesting possibilities.”

Turning to Kroondal mine, production is pretty comfortably in line to reach its target of 450,000 ounces (225,000 oz attributable), and life of mine is till 2017. “There are extension opportunities – I don’t think that there will be much more, and I would estimate that 470,000 oz would be the optimal annual output possibility,” Bias calculates.

“The prospects for our Marikana operation have improved, with production up to 170,000 ounces a year, and life of mine stretching to 2024. At our Mimosa mine in Zimbabwe production has reached 200,000 ounces a year, and life of mine is 20 plus years. There is some interesting exploration underway, but we need to do more work there.”

Turning to the company’s two tailings projects, Bias says Platinum Mile is the more interesting of the two. “That project has just come out of expansion mode, and will be producing at an annualised 34,000 ounces. It’s not a huge operation, but because there are no mining costs associated with it, the margins are attractive.”

Platinum Mile is a large volume, low-grade operation, which is a perfect contrast to the other Aquarius tailings operation, the Chromite Tailings Retreatment Programme (CGRP), which is low volume, high-grade – particularly in rhodium. “It is only about a third of the size of Platinum Mile, with production of some 12,000 ounces a year until 2017, Bias concludes.