28th Oct 2008 07:00
Aquarius Platinum
First Quarter 2009 Financial & Production Results
Highlights of the Quarter
Attributable production increased 17% to 128,366 PGM ounces
Reduction in cash costs per ounce at Kroondal, Marikana, Mimosa, CTRP and Platinum Mile
Significant falls in all PGM prices, with some respite from a weaker Rand US Dollar exchange rate
Gross "cash" profit of $49.1 million (gross "cash" margin of 34%) before negative impact of metal price revenue adjustments ($37.7 million) attributable to the preceding quarter
Negative metals price revenue adjustments on metals in pipeline of $71.9 million ($37.7 million from prior quarter and $34.2 million in current quarter), resulting in a net loss of $21.5 million for the quarter
Commenting on the results, Stuart Murray, CEO of Aquarius Platinum said "Despite all the gloom in the sector, it is encouraging that the production turnaround we required has started to deliver, with increases in production and decreases in unit costs across most of our operations, despite the inflationary cost pressures experienced over the last two quarters in particular. The operations at Mimosa had an outstanding quarter despite the challenges facing management due to the prevailing economic circumstances".
However operations experienced softer margins as the production and cost improvements were not sufficient to offset shrinking revenue and negative metal price revenue adjustments attributable to the significant fall in the prices of all the metals we produce. During the quarter, the shine came off our basket of metals, with prices falling back to levels last seen in 2006 and earlier. With this background, the Number 2 Shaft at Marikana has already been placed on care and maintenance, with the redeployment of skills and underground equipment to other positive margin generating areas Marikana and Kroondal. The group financials have reported a net loss for the quarter, attributable in part to the flow through of negative revaluations of June quarter sales recognized in the current quarter. Just as profits rose very sharply in Q3 and Q4 of FY2008 at the time of the electricity crisis, they have fallen as sharply in this quarter due to ongoing crises in financial markets."
P&SA1 at Kroondal
PGM production up 22% quarter-on-quarter to 101,731 PGM ounces (Aquarius attributable 50,866 PGM ounces)
Effective cash margin of 47%, reduced to -5% after accounting for negative sales price adjustments
P&SA2 at Marikana
PGM production up 37% quarter-on-quarter to 38,883 PGM ounces (Aquarius attributable: 19,442 PGM ounces)
Effective cash margin of 24%, reduced to -57% after accounting for negative sales price adjustments
Everest
PGM production up 3% quarter-on-quarter to 32,365 PGM ounces (Aquarius attributable 32,365 PGM ounces)
Effective cash margin of 36%, reduced to -37% after accounting for negative sales price adjustments
Mimosa
PGM production up 13% quarter-on-quarter to 43,638 PGM ounces (Aquarius attributable 21,819 PGM ounces)
Cash margin for the quarter reduced to 69% following metal price reductions
CTRP
PGM production down 14% quarter-on-quarter to 1,764 PGM ounces (Aquarius attributable: 882 PGM ounces)
Effective cash margin of 69%, reduced to -8% after accounting for negative sales price adjustments
Platinum Mile
PGM production up 19% quarter-on-quarter to 5,983 PGM ounces (Aquarius attributable: 2,992 PGM ounces)
Cash margin for the quarter at 44%
Financials
Production of PGMs attributable to shareholders of Aquarius was 128,366 PGM ounces, up 17% from the previous quarter ended 30 June 2008. All mines recorded increased production with the exception of the CTRP operation where a minimal shortfall of 140 PGM ounces was recorded. Mine operations that recorded the most significant production increase were Marikana, up 37% from the previous quarter and Kroondal, up 22% from the previous quarter.
For the quarter to 30 September 2008, revenue was $178 million before the impact of negative $71.9 million sales adjustments due to significantly weaker PGM prices. The $71.9 million comprises a $37.7 million adjustment for production from the previous June quarter revalued at the lower PGM prices in the current quarter and an unrealised $34.2 million adjustment for production in the current quarter repriced at the lower PGM prices at the end of the quarter. Consequently, revenue recorded to the profit & loss account after the negative sales adjustment for the quarter was $106 million (comprising sales revenue of $101 million and interest income of $5 million).
Aquarius settles its PGM concentrate sales based on a four month pipeline. Accounting standards predicate that revenue is calculated in the month of concentrate delivery at the prevailing PGM spot price and foreign exchange rate and in the following months any unsettled sales in the pipeline are revalued to current spot prices and foreign exchange rates, resulting in positive or negative sales price adjustments and foreign exchange adjustments. Settlement of the sales pipeline is concluded in month four following delivery based on PGM spot prices at the date of settlement. For the quarter to September 2008, platinum closed 54% lower at $1,004 per ounce and rhodium 58% lower at $4,050 per ounce.
Gross margins for the quarter were eroded due to the impact of the negative sales adjustment described above. It should be noted, however, that after adjusting for the $37.7 million negative adjustment to pipeline sales relating to the previous quarter, the gross "cash" profit would have been $49.1 million and the gross "cash" margin for the quarter under review would have been be 34.1% as demonstrated in Table B below.
Table A: Aquarius Attributable Production and Net Profit Summary by Quarter
Quarter Quarter Quarter Quarter ended ended ended ended Dec 2007 Mar 2008 Jun 2008 Sep 2008
4PGE Production (attributable) 137,456 112,527 109,863 128,366
Revenue $189.8m $191.8m $217.4m $178.2m
PGM Sales Adjustments - Realised & $32.2m $56.6m $29.6m ($71.9m) Unrealised
Total Revenue $222.0m $248.4m $247.0m $106.3m
Net Profit/(Loss) After Tax & $57.1 $90.8m $39.1 ($21.5m) Outside Equity Interests
Table B: Analysis of Impact of the PGM Sales Adjustment on Current Quarter Gross Margins
Current Portion of sales adjustment Adjusted gross profit Quarter relating to previous quarter for the current quarter Revenue $178.2m - $178.2m Impact of Sales ($71.9m) ($37.7m) ($34.2m) Adjustments Reported $106.3m ($37.7m) $144.0m Revenue Cost of Sales ($94.9m) - (94.9m) (cash) Gross "Cash" $11.4m - $49.1m Profit Gross "Cash" 10.7% - 34.1% Margin (%) Depreciation & ($10.0m) - ($10.0m) Amortisation Gross Profit $1.4m ($37.7m) $39.1m
Reflecting the impact of a significant fall in PGM and base metal prices since the June quarter and the consequent realised and unrealised negative revenue adjustments of $71.9 million, the consolidated earnings for the quarter to 30 September 2009 recorded a net loss of $21.5 million (US 8.2 cents per share).
The movement in the PGM sales adjustments as disclosed above is an indicator of the movement in PGM prices during a quarter. As PGM prices have decreased further subsequent to the end of the September quarter, it is likely that Q2 will also be impacted by negative sales adjustments unless PGM prices stabilise at levels recorded at the end of this quarter.
Finance charges for the quarter of $11.5 million included interest payments on the RMB debt facility of $8.2 million, pipeline finance of $1.6 million and a non-cash component of $1.7 million on the unwinding of the rehabilitation provision.
At operations in South Africa, price increases have been experienced in the following input costs:
Table C: Quarterly Price Cost Increases at AQPSA, Q1 FY2009 Compared to Q4FY2008 Q1 2009 compared to Q4 2008 Labour 21% Diesel 17% Chemicals 60% Explosives 45% Steel 28% Electricity* 60%
Labour costs remain under pressure due to the increasing competition for critical skills in the mining industry as well as inflation driven wage demands. These increases are annual, but came into effect during the first quarter at the same time that the labour complement increased. Even though most input prices are market driven, management are constantly assessing options to reduce supplier prices through ongoing re-evaluation and re-tendering of primary consumables.
The following chart shows the percentage breakdown of cash costs at AQPSA over the past five quarters. The Rand increases in all costs are evident, though it should be noted that the relative increased contribution to costs from labour and explosives do also mask efficiency gains achieved in all components, notably power (diesel and electricity) and steel consumption.
Looking to the second quarter 2009, it is anticipated that reductions in unit costs will be achieved again as production increases further and falling prices for diesel, chemicals and steel start to flow through the cost base. In addition US$ weakness is expected to provide some respite as the falling price of consumables starts to feed through to costs during the second quarter.
Depreciation and amortisation was in line with expectation at $10.3 million as was the amortisation arising from the fair value uplift of mineral rights at $1.7 million.
The Aquarius group cash balance at 30 September 2008 totalled $214 million, an increase of $43 million since 30 June 2008. Net operating cash flow for the quarter was $91 million with $208 million received from sales, $113 million paid to suppliers and net finance costs of $5 million. Material cash flow items (other than mine operations) that affected cash balances during the quarter included capital expenditure of $11 million and dividends paid of $26 million.
Group cash is held as follows:
AQP $27 million AQPSA $157 million ACS(SA) $8 million Mimosa $22 million Total $214 million Production by Mine Quarter Ended PGMs (4E) Dec 2007 Mar 2008 Jun 2008 Sep 2008 Kroondal 101,542 100,020 83,062 101,731 Marikana 37,744 24,223 28,416 38,883 Everest 46,719 31,107 31,327 32,365 Mimosa 39,372 34,283 38,517 43,638 CTRP 2,816 2,309 2,044 1,764 Platinum Mile - 2,006* 5,035 5,983 Total 228,193 193,948 188,401 224,364
Production by Mine Attributable to Aquarius
Quarter Ended PGMs (4E) Dec 2007 Mar 2008 Jun 2008 Sep 2008 Kroondal 50,771 50,010 41,531 50,866 Marikana 18,872 12,111 14,208 19,442 Everest 46,719 31,107 31,327 32,365 Mimosa 19,686 17,142 19,258 21,819 CTRP 1,408 1,154 1,022 882 Platinum Mile - 1,003* 2,517 2,992 Total 137,456 112,527 109,863 128,366 *From 1 March 2008
Metals Prices and Foreign Exchange
PGM and base metals prices weakened considerably through the first quarter from record highs down to prices last experienced in early 2006. Platinum closed 52% lower at $1,004 per ounce; rhodium 58% lower at 4,050 per ounce; palladium 57% lower at $199 per ounce, while gold fell only 3% at $894 per ounce. Prices have continued to fall in October 2008 and will continue to impact the financial performance of the Group.
Platinum experienced strong falls due to redemptions of physical positions from both TOCOM and the ETF at a time of seasonally low demand as autocatalyst producers destocked over the northern hemisphere summer. The situation deteriorated into September with the liquidation of large physical positions as certain institutional funds were shut down.
Recessionary concerns highlighted by falling auto sales have dampened the perceived outlook for autocatalyst sales. In the medium term, it is expected that tightening emissions standards in North America, Europe and Japan in 2009 and 2010 will increase PGM catalyst loadings, and this, together with the need for replacement catalysts on ageing autos fleet, will offset any reduction due to declining sales of new autos.
Ongoing constraints in supply have largely continued unnoticed, with industry production likely to be considerably lower in the short and long-term due to ongoing power, cost and labour issues and in the long-term as expansions and new projects by junior and major miners alike are being delayed or indeed scrapped altogether.
PGM basket prices fell to levels last seen in 2006. The average basket price for South African operations fell 55% over the quarter from $2,378 to $1,082 per 4PGE ounce and 52% in Rand terms from R18,615 to R8,984 per 4PGE ounce. In Zimbabwe, the average basket price fell 52% from $1,689 to $812 per 4PGE ounce. The noticeable difference in the dollar and rand falls is due to a weakening of the rand over the quarter of 6% to 8.30 on 30 September 2008 as shown in the chart below. Since the quarter end the Rand has continued to weaken against the US dollar.
The average PGM basket prices for the Group fell for the quarter in both Rand and US Dollar terms, down 23% to R13,049 per 4PGE ounce and 23% to $1,684 per 4PGE ounce respectively. While US dollar commodity prices have continued to weaken in October 2008, the Rand basket price has suffered less due to a weakening Rand/US dollar rate which broke through 11.00 towards the end of October.
Average PGM basket prices achieved at Aquarius operations: US$ per PGM ounce(4E) Basket Prices (Quarter Ended) Dec 2007 Mar 2008 Jun 2008 Sep 2008 Kroondal 1,657 2,129 2,350 1,758 Marikana 1,632 2,041 2,311 1,693 Everest 1,635 2,112 2,266 1,692 Mimosa 1,083 1,237 1,607 1,549 CTRP 1,967 2,505 2,850 2,251 Platinum Mile - - 1,989 1,085 Aquarius Group Average 1,567 1,981 2,187 1,684 Aquarius Platinum Limited Consolidated Income Statement Quarter ended 30 Sep 2008 $'000 Financial Quarter Ended Year ended Note: 30/09/08* 30/09/07* 30/6/08 Aquarius PGM Production 128,366 140,357 500,203(attributable ounces) Revenue (i) 106,243 201,620 919,012 Cost of sales (ii) (104,870) (88,445) (359,873) Gross profit/(loss) 1,373 113,175 559,139 Other income 74 298 2,109 Admin & other operating costs (2,327) (2,012) (10,467) Other FX movements (iii) (23,427) (7,750) 14,286 Finance costs (iv) (11,598) (3,616) (28,260) Profit/(loss) before tax (35,905) 100,095 536,807 Income tax expense (1,129) (24,659) (173,214) Profit/(loss) after tax (37,034) 75,436 363,593 Minority interest (v) 15,475 (25,915) (127,119) Net profit/(loss) (21,559) 49,521 236,474 EPS (basic - cents) (8.2) 58.2 92.0 * Unaudited
Notes on the September 2008 Consolidated Income Statement
Revenue is lower compared to September 2007 quarter despite a higher average PGM basket price of $1,684 per ounce in the current quarter, due to (i) $37.7 million realised negative PGM price adjustment attributable to the preceding quarter, caused by decreasing prices in the current quarter and (ii) 8.5% lower PGM production in current quarter.
Cost of sales per PGM ounce increased due to lower production at Everest and the impact of inflation on SA costs.
Reflects foreign exchange movements on revaluation of net monetary assets at 30 September including pipeline finance $7.8million, costs of goods sold at Mimosa $6.9 million, $8.7 million on cash assets.
Finance costs includes group debt $8.2 million, pipeline finance $1.6 million and unwinding of rehabilitation provision $1.7 million.
Minority interests reflect outside equity interest of the Savannah Consortium 32.5% (SavCon) in AQPSA.
Aquarius Platinum Limited Consolidated Cash flow Statement Quarter ended 30 September 2008 $'000 $'000 Quarter ended Financial year ended Note: 30/09/08* 30/09/07 30/06/08 * Net operating cash inflow (i) 90,637 114,428 346,260 Net investing cash outflow (ii) (11,499) (10,359) (125,235) Net financing cash outflow (iii) (26,205) (336) (320,081) Net increase in cash held 52,933 103,733 (99,056) Opening cash balance 170,956 287,663 287,663 Exchange rate movement on cash (10,064) 3,623 (17,651) Closing cash balance 213,825 395,019 170,956 * Unaudited
Notes on the September 2008 Consolidated Cash flow Statement
Net operating cash flow includes $208 million inflow from sales, $113 million paid to suppliers and net finance expense of $4.8 million.
Reflects development and plant and equipment expenditure of $11.4 million.
Includes the final dividend transferred to Computershare for payment to shareholders of $26.2 million.
Aquarius Platinum Limited Consolidated Balance Sheet At 30 September 2008 $'000 Note: 30/09/08* 30/06/08 Assets Cash assets 213,825 170,956 Current receivables (i) 78,888 186,964 Other current assets (ii) 43,141 35,941 Property, plant and equipment (iii) 213,251 214,314 Mining assets (iv) 295,437 284,629 Other non-current assets 15,283 15,599 Goodwill 56,842 58,505 Total assets 916,667 966,908 Liabilities Trade and other payables 58,879 56,294
Current interest bearing liabilities (v) 202,248 208,161
Other current liabilities 4,711 3,157 Non-current interest-bearing liabilities 2,462 1,657 Other non-current liabilities (vi) 150,878 153,125 Total Liabilities 419,178 422,394 Net assets 497,489 544,514 Equity Parent entity interest 477,940 508,914 Minority interest 19,549 35,600 Total Equity 497,489 544,514 * Unaudited
Notes on the September 2008 Consolidated Balance Sheet
Receivables relating to PGM concentrate sales, decrease relates to drop in PGM prices.
Reflects PGM concentrate inventory.
Represents plant and equipment within the Group.
Mining assets for Kroondal, Marikana, Mimosa and Everest mining (mining rights) operations.
Rand Merchant Bank debt facility.
Includes deferred tax liabilities $90 million and provision for closure costs $59 million.
AQUARIUS PLATINUM (SOUTH AFRICA) (PTY) LTD (Aquarius Platinum 67.5%)
P&SA 1 at Kroondal
Safety
The 12-month rolling average DIIR for the quarter deteriorated from 0.49 in the previous quarter to 0.54. Eleven lost time injuries were reported during the quarter.
As already announced, it is regrettable that a fatal accident occurred at the Kroondal Platinum Mine's K5 shaft on Friday 5 September when a fitter assistant, Mr Siyabonga Hlungwani, an employee of mining contractor Redpath Mining, was fatally injured when he was struck by a Load Haul Dump (LHD) vehicle in the underground operation.
AQPSA has concluded the internal investigation but was issued a Section 54 instruction under the Mine Health and Safety Act, 1996. The instruction resulted in a 3-day stoppage on all Kroondal and Marikana shafts. The Department of Minerals and Energy (DME) has yet to complete the enquiry into the accident.
Mining
Production tons increased by 22% to 1,697,669 tons
Head grade increased marginally to 2.54 g/t.
Processing
Tons processed increased by 17% to 1,567,146 tons.
Recoveries improved to 78%.
PGM production increased by 22% to 101,731 PGM ounces.
Revenue
The basket price for the quarter averaged $1,758 per PGM ounce, 25% lower than the previous quarter. The Rand Dollar exchange rate averaged 7.75 for the quarter. Revenue at Kroondal decreased by 60% to R542 million for the quarter (Aquarius attributable: R271 million).
The increase in production was offset by the significant reduction in the basket price. This was compounded by negative sales adjustments caused by weakening PGM prices at the close of the period compared to the close of the prior quarter.
Operations
Total production increased by 22% to 1,697,669 tons. Production from underground operations increased by 21% to 1,688,170 tons with only 9,499 tons produced from open pit operations. It is envisaged that open pit production will be completed during the next quarter.
Production was adversely affected during the quarter by underground mining contractors Murray & Roberts and Redpath SA's employees embarking on protected industrial action. Two national stay-aways were organised by the National Union of Mineworkers in protest of the high local price of food resulting in two days of lost production. In addition, production was also impacted by the Section 54 instruction issued by the DME following the fatal accident at K5 shaft. Aquarius, in conjunction with Murray & Roberts and organised labour, has embarked on a comprehensive relationship-building initiative, which was launched during the quarter. Murray & Roberts finalised wage negotiations during the period, reaching agreement with organised labour.
Production was also negatively affected by the fewer number of production days due to two public holidays during the quarter.
Tons processed increased by 17% to 1,567,146 tons, comprising 1,564,187 tons from underground and 2,960 tons of opencast material. Stockpiles at the end of the quarter were 23,740 tons.
The head-grade increased to 2.54 g/t.
Recoveries increased 1.5% to 78%.
PGM production increased by 22% to 101,731 PGM ounces (Aquarius attributable: 50,866 ounces) due to the increased underground production.
Primary development for the quarter was 1,935 metres.
Kroondal: Metal in concentrate produced (PGM ounces)
Quarter ended Pt Pd Rh Au PGMs Attributable to Aquarius Sep 2008 60,634 29,573 11,068 456 101,731 50,866 Jun 2008 49,621 24,054 9,014 372 83,062 41,531 Mar 2008 59,834 28,966 10,759 461 100,020 50,010 Dec 2007 60,726 29,525 10,819 472 101,542 50,771 Operating Cash Costs
Cash costs per ton increased by 2% to R362 and costs per PGM ounce decreased by 2% to R5,579. The positive effect of increased production was negated by inflationary factors, including the implementation of market-related wage increases and exceptionally high increases in electricity, steel and diesel costs during the period. Nevertheless, the increase in production resulted in sufficient fixed cost dilution to effect a marginal unit cost reduction for the period. Gross revenue decreased by 60% to R542m as a result of the significant decline in PGM prices and the negative sales adjustment. As a result, Kroondal Mine shows a negative cash margin for the period of -5%, however, the calculated cash margin for the quarter excluding the sales adjustments is 47% showing that the operation remains cash generative in terms of current operations.
Kroondal: Operating Cash Costs per Ounce
4E 6E 6E net of by-products (Pt+Pd+Rh+Au) (Pt+Pd+Rh+Ir+Ru+Au) (Ni&Cu) Kroondal R 5,579 R 4,577 R 4,437 Capital Expenditure
Capital expenditure for the quarter was R79.05 million, all ongoing capital. Major items included the rail link to the K5 shaft, upgrade of workshops and underground infrastructure.
P&SA2 at Marikana
Safety
The 12-month rolling average DIIR for the quarter deteriorated from 0.54 in the previous quarter to 0.64. Eight lost time injuries were reported during the quarter.
Mining
Production tons increased by 35% to 694,832 tons, comprising 360,915 tons from underground and 333,917 tons from open pit operations
Head grade increased by 5% to 2.81 g/t
Processing
Tons processed increased by 30% to 683,525 tons
Recoveries remain unchanged at 63%
PGM production increased by 37% to 38,883 ounces (Aquarius attributable: 19,442 ounces)
Revenue
The basket price for the quarter averaged $1,693 per PGM ounce, 27% lower than the previous quarter. The Rand Dollar exchange rate remained stable at 7.75 for the quarter. Quarterly revenue at Marikana decreased by 54% to R195 million (Aquarius attributable: R98 million) due to a significant reduction in PGM prices and negative sales adjustments caused by weakening PGM prices at the close of the period compared to the close of the prior quarter as detailed.
Operations
Total production increased by 35% to 694,832 tons for the quarter.
The opencast operation performed well showing a quarter-on-quarter increase of 40% to 333,917 tons. The change in the pit mining direction has now been completed for all the pits with mining taking place along dip. The stripping ratio for the quarter decreased by 14% to 30:1.
Production from underground operations increased by 31% to 360,915 tons. Despite the strong increase, production from underground was adversely affected by loss of face length due to increased frequency of potholes. Focus has been placed on development to mitigate the impact of the geological losses. A Section 54 instructionunder the Mine Health and Safety Act, 1996 was issued by the DME for all the underground operations after a fatality at Kroondal K5 Shaft, resulting in three lost production days during the quarter.
Two national stay-aways were organised by the National Union of Mineworkers in protest of the high price of food resulting in two days of production lost. Production was also negatively affected by the fewer number of production days due to two public holidays during the quarter.
Industrial relations have improved substantially from the last quarter since AQPSA has assumed more managerial responsibility at the operation previously in the hands of contractors. During the quarter, a team-building exercise was held with organised labour to formulate better working relationships, and for the quarter, no further industrial action took place at Marikana.
The Number 2 Shaft at Marikana will be placed on care and maintenance, with the redeployment of skills and equipment to other revenue generating shafts at Marikana and Kroondal. The Shaft suffers from geological constraints and has been yielding 8,000 tons a month against a target of 20,000 tons. In terms of annualised production this is approximately equal to 5,600 PGM ounces, representing approximately 3.6% of Marikana production and 1% of group production for the quarter to September 2008. Skills and equipment are in process of being redeployed to other shafts at Marikana and Kroondal.
Tons processed increased by 30% to 683,525 tons, comprising 367,243 tons from underground and 316,282 tons of open pit. Stockpiles at the end of the quarter were 104,484 tons, an increase of 49% from the previous quarter. The stockpile increased from the last quarter in preparation for the rainy season and primarily consists of open pit ore.
The head-grade increased by 5% to 2.81 g/t, whilst recoveries remain unchanged at 63%. Although the underground ore processed was 16% more than open pit ore, lower recoveries of the open pit material was realised due to the deeper zones of weathering in the pit areas mined during the quarter.
PGM production for the quarter increased 36% to 38,883 PGM ounces (Aquarius attributable: 19,442).
Marikana: Metal in concentrate produced (PGM ounces)
Quarter ended Pt Pd Rh Au PGMs Attributable to Aquarius Sep 2008 24,182 10,609 3,866 226 38,883 19,442 Jun 2008 17,843 7,649 2,769 155 28,416 14,208 Mar 2008 15,114 6,601 2,351 158 24,223 12,111 Dec 2007 23,985 9,925 3,586 249 37,744 18,872 Operating Cash Costs
Cash costs per ton decreased by 24% to R448, whilst costs per PGM ounce decreased by 27% to R7,868. The unit cost remained under pressure from inflationary factors, including the implementation of market-related wage increases and exceptionally high increases in electricity, steel and diesel costs during the period, but was positively impacted by the strong production increase. Gross revenue decreased by 54% to R195m as a result of the significant decline in PGM prices and the negative sales adjustment. As a result, Marikana Mine shows a negative cash margin for the period of -57%, however, the calculated cash margin excluding the sales adjustments is 24% showing that the operation remains cash generative for the quarter in terms of current operations.
Marikana: Operating Cash Costs per Ounce
4E 6E 6E net of by-products (Pt+Pd+Rh+Au) (Pt+Pd+Rh+Ir+Ru+Au) (Ni&Cu) Marikana R 7,868 R 6,473 R 6,273 Capital Expenditure
Capital expenditure totalled R22.4 million, including R20.6 million for ongoing capital (AQPSA share R10.3 million).
Contractor dispute with Moolman Mining
There have been no new developments during the quarter.
Everest Platinum Mine
Safety
The 12-month rolling average DIIR for the quarter improved from 0.89 in the previous quarter to 0.65. Two lost time injuries were reported during the quarter.
Mining
Underground production increased by 8% to 440,675 tons; all opencast mining was completed during the previous quarter.
The head grade deteriorated by 2% to 2.84 g/t.
Processing
Plant processed 436,762 tons, 4.0% more than the previous quarter.
Recoveries improved from 80% to 81%.
PGM production increased by 3.0% to 32,365 PGM ounces.
Revenue
The basket price for the quarter averaged $1,692 per PGM ounce, 25% lower than the previous quarter, with average Rand Dollar exchange rate of 7.75. Revenue at Everest decreased by 70% to R157 million for the quarter (Aquarius attributable: R157 million) due to the significant weakening of PGM prices and negative sales pipeline adjustments caused by weakening PGM prices.
Operations
Total production increased by 6% to 440,675 tons, all from underground operations following the completion of open pit operations in the last quarter.
Production from underground operations increased by 8% during the quarter but was still adversely affected by the low availability of trackless mobile machinery and the challenging geology on the northern side of the mine resulting in all bords being cut in length by 50% for safety reasons. Wage negotiations also had an impact on employee performance and both agreements with Solidarity and the National Union of Mineworkers were successfully concluded midway through the quarter. Production was also negatively affected by the fewer number of production days due to two public holidays during the quarter.
Industrial relations show signs of improving due to the owner-operator model and active intervention by management through an employee relation and behaviour specialist.
Tons processed increased by 4% to 436,762 tons in line with the production. Stockpiles at the end of the quarter were 4,008 tons.
The head-grade decreased by 2% to 2.84 g/t due to the mining of the pyroxenite hanging-wall up to the shear zone in the northern side of the mine.
Recoveries improved 1.50% to 81% due to ongoing process optimisation.
PGM production increased by 3.0% to 32,365 PGM ounces.
Primary development for the quarter was 1,078 metres.
Everest: Metal in concentrate produced (PGM ounces)
Quarter ended Pt Pd Rh Au PGMs (4E) Sep 2008 19,302 9,465 3,325 274 32,365 Jun 2008 18,777 9,060 3,236 254 31,327 Mar 2008 18,863 8,912 3,072 259 31,107 Dec 2007 27,897 13,576 4,877 369 46,719 Operating Cash Costs
Cash costs per ton increased by 13% to R493 per ton, whilst costs per PGM ounce increased by 14% to R6,656. The increase in unit cost is attributed to inflationary factors, including the implementation of market-related wage increases and exceptionally high increases in electricity, steel and diesel costs during the period. Operational improvement measures are being implemented to realise a unit cost reduction. The cash margin for the quarter reduced to -37%. This variance is attributed to the negative pipeline sales adjustment that resulted from the significant fall in PGM prices during the quarter as detailed above. Gross revenue decreased by 70% to R157m as a result of the significant decline in PGM prices and the negative sales adjustment. As a result, Everest Mine shows a negative cash margin for the period of -37%, however, the calculated cash margin excluding the sales adjustments is 36% showing that the operation remains cash generative in terms of current operations.
Everest Operating Cash Costs per PGM Ounce
4E 6E 6E net of by-products (Pt+Pd+Rh+Au) (Pt+Pd+Rh+Ir+Ru+Au) (Ni&Cu) Everest R 6,656 R 5,421 R5,249 Capital Expenditure
Capital expenditure for the quarter was R26.6 million, for ongoing capital. Major items included conveyors at Strike 12 and Dip 5; four new utility vehicles and one new drill rig.
MIMOSA INVESTMENTS (Aquarius Platinum 50%)
Mimosa Platinum Mine
Safety
The 12-month rolling average DIIR for the quarter improved from 0.23 in the previous quarter to 0.19. Two lost time injuries were reported during the quarter.
Mining
Underground production marginally increased by 0.6% to 500,000 tons
Head grade slightly decreased 0.3% to 3.59 g/t
The surface stockpile decreased to a total 482,000 tons at the end of the quarter, equivalent to over 70-days mill feed
Processing
Concentrator plant recoveries decreased to 73.4% from 75.9%
Total mine production increased by 13% to 43,638 PGM ounces (Aquarius share: 21,819 PGM ounces)The Wedza Phase 5 expansion project has been fully commissioned and is attaining design throughputs.
Revenue
The average achieved PGM basket price for the quarter decreased by 4% to $1,549 per PGM ounce. The average achieved nickel price over the quarter decreased by 26% to $9.79 per pound from $13.17 per pound in the previous quarter. Revenue for the quarter decreased to $63.7 million, with base metals accounting for approximately 21% of revenue. The cash margin decreased to 69% from 77% in the previous quarter mainly due to falling metal prices.
Operations
During the quarter mining operations hoisted 499,590 tons compared to 497,228 tons in the previous quarter. Tons milled during the quarter totalled 514,867 tons, with 15,277 tons being taken from the stockpile, which totalled 482,416 tons at the quarter end. In line with plan, the stockpile decreased by 15,277 tons.
The average plant grade marginally decreased to 3.59 g/t, compared to 3.60 g/t in the previous quarter
Tons processed totalled 514,867, a 17% increase compared to the previous quarter, due to Phase V commissioning at the end of the quarter.
Recoveries for the quarter slightly decreased to 73.4% from 75.9% due to reagent dosing facilities and poor water balancing.
PGM production during the quarter increased by 13% to 43,638 ounces (Aquarius attributable: 21,819 ounces).
Mimosa: PGMs in concentrate produced (ounces)
Quarter ended Pt Pd Rh Au PGMs Attributable to Aquarius Sep 2008 22,113 16,863 1,770 2,892 43,638 21,819 Jun 2008 19,532 14,821 1,535 2,628 38,517 19,258 Mar 2008 17,392 13,234 1,351 2,306 34,283 17,142 Dec 2007 19,996 15,216 1,563 2,597 39,372 19,686
Mimosa: Base Metals in concentrate produced (tons)
Mine Production Attributable to Aquarius Quarter ended Ni Cu Co Ni Cu Co Sep 2008 602 498 17 301 249 8.5 Jun 2008 533 439 15 266 219 7 Mar 2008 475 392 14 237 196 7 Dec 2007 541 446 15 270 223 7 Operating Cash Costs
Cash costs per ROM ton decreased by 7% to $39, whilst costs per PGM ounce decreased by 5% to $465. The decrease in cash costs for the quarter was attributable to high production throughput recorded during the quarter. On mine cash costs were well retained at $370 per PGM ounce despite the impact of Zimbabwean inflation on total costs. The gross cash margin decreased to 69% from 77% in the previous quarter.
Net of by-products, cash costs were positive at $144 per PGM ounce, compared to $(23) per PGM ounce in the previous quarter, primarily due to falling nickel prices.
Mimosa Operating Cash Costs per Ounce
4E 6E 4E net of by-products (Pt+Pd+Rh+Au) (Pt+Pd+Rh+Ir+Ru+Au) (Ni, Cu & Co) Mimosa $465 $443 $143
Update on Foreign Currency Regime in Zimbabwe
The Interbank foreign exchange market introduced in April 2008 is still operational. The interbank exchange rates are; however, way below either the Old Mutual Implied rates and the parallel rates. The Central Bank has also recently authorised approximately 1,000 retail and wholesale outlets nation-wide to sell products in United States dollars.
Update on Indigenisation Legislation in Zimbabwe
The Indigenisation and Economic Empowerment bill was enacted into law during the last quarter of the previous financial year. Specific details on the implementation of the act in various sectors are being awaited. The details on the mining sector are supposed to be incorporated into the amendments to the Mines and Minerals Act which are yet to be brought before parliament.
Wedza Phase 5.5 Expansion
The Wedza Phase 5.5 Expansion Project has been fully commissioned and is attaining design throughputs. The major outstanding part of the project is on ventilation, to be completed in November 2008 allowing for a scope change to seal the two vent holes. Minor remedial actions are being attended to in the plant, in particular the replacement of the trammel-screen and completing the installation of the tailing line. It is planned to complete these in November 2008 as well. An intense programme is also being pursued to improve efficiencies in particular recoveries.
AQUARIUS PLATINUM (SA) CORPORATE SERVICES (PTY) LTD
Chromite Tailings Retreatment Plant (CTRP) (Aquarius Platinum 50%)
Safety
The DIIR increased from 5.62 to 5.69 from the previous quarter. No lost time accidents were recorded.
Processing
Material processed remained constant at 70,000 tons
Grade decreased 18% to 2.66g/t
Recoveries increased by 12% to 33%
Production decreased 14% to 1,764 PGM ounces (Aquarius attributable: 882 PGM ounces)
Revenue
The basket price for the quarter averaged $2,251 per PGM ounce, 21% lower than the previous quarter, with average Rand Dollar exchange rate of 7.75. Revenue decreased by 86% to R6 million for the quarter (Aquarius attributable: R3 million) due to the lower production and negative sales pipeline adjustments caused by weakening PGM prices at the close of the period compared to the close of the prior quarter.
Operations
Material processed constant at 70,000 tons.
The head grade, however, decreased 18% to 2.66 g/t as a result of treating the lower grade material from the tailings dam outer areas, this material has a reduced grade as the PGM fines migrate to the centre of the dam during deposition.
Nevertheless, recoveries increased by 12% to 33% due the ongoing optimisation of the fine grind milling circuit. The improvement in grind was achieved by controlling the out let temperature of the mill. A higher temperature indicates better utilisation of the mill power thereby improving the grind.
This resulted in production decreasing by 14% to 1,764 PGM ounces (Aquarius attributable: 882 ounces) this decrease in production was due to the lower feed grade.
CTRP: Metal in concentrate produced (PGM ounces)
Quarter ended Pt Pd Rh Au PGMs (4E) Sep 2008 1,077 388 295 4 1,764 Jun 2008 1,254 452 333 5 2,044 Mar 2008 1,437 517 351 5 2,309 Dec 2007 1,750 626 434 6 2,816 Operating Costs
Cash costs decreased by 13% to R3,785 per PGM ounce. Cash margin for the period of -8%, however, the calculated cash margin excluding the sales adjustments is 69% showing that the operation remains cash generative in terms of current operations.
CTRP Operating Cash Costs per Ounce
4E 6E 4E net of by-products (Pt+Pd+Rh+Au) (Pt+Pd+Rh+Ir+Ru+Au) (Ni, Cu& Co) CTRP R 3,785 R 2,568 R 2,460
Platinum Mile (Aquarius Platinum 50%)
The effective date of the acquisition of the 50% interest in Platinum Mile was 1 March 2008.
Safety
The DIIR was zero for the quarter. No lost time accidents were recorded.
Processing
Tailings processed increased 9% compared to the previous quarter to 2,568 million tons
PGM grade was 0.76 g/t
Production was 5,983 PGM ounces (Aquarius attributable: 2,992 PGM ounces)
Revenue
Revenue was R42 million for the quarter (Aquarius attributable: R21 million). The basket price for the quarter averaged $1,085 per PGM ounce, at an average Rand Dollar exchange rate of R7.76. The cash margin for the quarter was 44%.
Operations
The head grade increased marginally to 0.76 g/t compared to 0.71 g/t the previous quarter.
Recoveries remained constant at 9% compared to the previous quarter.
Production increased 19% to 5,983 PGM ounces (Aquarius attributable: 2,992 ounces), due to higher volumes treated at a slightly higher head grade, despite the commissioning of the new fine grind circuits. Significant downtime hampered production in September as equipment tie-ins necessitated the stopping of the plant.
Platinum Mile: Metal in concentrate produced (PGM ounces)
Quarter ended Pt Pd Rh Au PGMs (4E) Sep 2008 3,470 1,855 538 120 5,983 Jun 2008 2,920 1,561 453 101 5,035 Mar 2008 1,127 636 208 34 2,005 Operating Costs
Cash costs decreased by 37% to R4,665 per PGM ounce. The decrease is as a result of lower supplier compensation fees due to lower average metal basket prices.
Platinum Mile Operating Cash Costs per Ounce
4E 6E 4E net of by-products (Pt+Pd+Rh+Au) (Pt+Pd+Rh+Ir+Ru+Au) (Ni, Cu& Co) Platinum Mile R 4,665 Nm Nm
Capital expenditure for the quarter was R19 million incurred in expansion of the fine grinding circuit at the operation.
CORPORATE MATTERS
AQPSA Appointments
Aquarius is pleased to announce the appointment of Hugo HĦll as the Managing Director of AQPSA on 24 October 2008. Mr HĦll was previously the Group Manager for Projects, and Transformation at AQPSA. Further he was the General Manager of the Everest Mine where he worked from the very start of the mine's feasibility as AQPSA Project Manager.
Former Managing Director, Anton Wheeler, has been appointed to the new post as Operations Director of eastern limb operations, which currently comprise Everest, enabling him to focus his operational skills on developing the Everest Mine to its full potential. In addition, Anton Lubbe has been appointed as Operations Director of the western limb operations, comprising Kroondal and Marikana. Mr Lubbe has 28 years of mining experience, with exposure to gold, platinum, chrome and copper mining.
Update on BEE
On 27 October 2008, Aquarius Platinum announced the completion of the final phase of its South African BEE transaction with SavCon whereby SavCon exchanged its 32.5% shareholding in AQPSA into 65,042,856 new shares in Aquarius, comprising approximately 20% of the enlarged share capital of Aquarius. Subsequently, Aquarius increased its holding in AQPSA to 100% of AQPSA providing a modest boost to earnings. Following the take out of other minorities earlier in the year in Aquarius and AQPSA, Aquarius will also continue to enjoy a 100% free-float.
More information on corporate matters may be found at www.aquariusplatinum.com
Aquarius Platinum LimitedIncorporated in BermudaExempt company number 26290Board of DirectorsNicholas Sibley Non-executive Chairman Stuart Murray Chief Executive Officer David Dix Non-executive
Timothy Freshwater Non-executive
Edward Haslam Non-executive
Sir William Purves Non-executive
Kofi Morna Non-executive
Zwelakhe Mankazana Alternate to Kofi Morna
Audit/Risk Committee Sir William Purves (Chairman)David DixEdward HaslamNicholas Sibley
Remuneration/Succession Planning Committee
Edward Haslam (Chairman)Nicholas SibleyNomination Committee
The full Board comprises the Nomination Committee
Company SecretaryWilli BoehmAQPSA ManagementStuart Murray Executive Chairman Hugo HĦll Managing Director HĩlĬne Nolte Director: Finance Hulme Scholes Commercial Director Anton Lubbe Operations Director: West Anton Wheeler Operations Director: East Willie Byleveld General Manager: Technical Services
Graham Ferreira General Manager: Group Admin & Company Secretary
Mkhululi Duka General Manager: Group Human Resources & Transformation Wessel Phumo General Manager: Marikana Jacques Pretorius General Manager: Everest Gordon Ramsay General Manager: Metallurgy Rudi Rudolph General Manager: Kroondal Gabriel de Wet General Manager: Engineering
ACS (SA) Management
Paul Smith Director: New Business
Mimosa Mine Management
Winston Chitando Managing Director Herbert Mashanyare Technical Director Peter Chimboza Operations Director Fungai Makoni Finance Executive & Company Secretary Issued Capital
At 30 September 2008, the Company had in issue: 262,052,778 fully paid common shares and 1,680,305 unlisted options.
Substantial Shareholders 30 September 2008 Number of Shares Percentage
Nutraco Nominees Limited 18,464,125 7.05
HSBC Custody Nominees (Australia) Limited 16,830,141 6.42
Trading InformationISIN number BMG0440M1284
ADR ISIN number US03840M2089
Broker (LSE) (Joint) Broker (ASX) Sponsor (JSE) Morgan Stanley & Co Euroz Securities Investec Bank LimitedInternational Limited Level 14, The 100 Grayston Drive 20 Cabot Square, Canary Wharf Quadrant Sandown London, E14 4QW 1 William Street Sandton 2196 Telephone: +44 (0)20 7425 8000 Perth WA 6000 Telephone: +27 (0)11 Facsimile: +44 (0)20 7425 8990 Telephone: +61 (0)8 286 7326 9488 1400 Facsimile: +27 (0)11 Facsimile: +61 (0)8 291 1066 9488 1478 Investec Securities Limited Investec Bank (UK) Limited 2 Gresham Street London, EC2V 7QP Telephone: +44 (0)20 7597 5970 Facsimile: +44 (0)20 75975120
Aquarius Platinum (South Africa) (Proprietary) Ltd
67.5% Owned (At 30 September 2008)
(Incorporated in the Republic of South Africa)
Registration Number 2000/000341/07
Block A, 1st Floor, The Great Wall Group Building, 5 Skeen Boulevard, Bedfordview, South Africa 2007
Postal Address P O Box 1282, Bedfordview, 2008, South Africa.
Telephone: +27 (0)11 455 2050 Facsimile: +27 (0)11 455 2095
Aquarius Platinum Corporate Services Pty Ltd
100% Owned
(Incorporated in Australia)
ACN 094 425 555
Level 4, Suite 5, South Shore Centre, 85 The Esplanade, South Perth, WA 6151, Australia
Postal Address PO Box 485, South Perth, WA 6151, Australia
Telephone: +61 (0)8 9367 5211 Facsimile: +61 (0)8 9367 5233 Email: [email protected] GlossaryA$ Australian Dollar Aquarius Aquarius Platinum Limited ABET Adult Basic Education Training programme APS Aquarius Platinum Corporate Services Pty Ltd AQPSA Aquarius Platinum (South Africa) Pty Ltd
ACS (SA) Aquarius Platinum (SA) (Corporate Services) (Pty) Limited
BEE Black Economic Empowerment CTRP Chromite Ore Tailings Retreatment Operation. Consortium comprising Aquarius Platinum (SA) (Corporate Services) (Pty) Limited (ASACS), Ivanhoe Nickel and Platinum Limited and Sylvania South Africa (Pty) Ltd (SLVSA). DIFR Disabling Injury Incidence Rate - being the number of lost-time injuries expressed as a rate per 1,000,000 man-hours worked DIIR Disabling Injury Incidence Rate - being the number of lost-time injuries expressed as a rate per 200,000 man-hours worked DME South African Government Department of Minerals and Energy Affairs Dollar United States Dollar or $ EMPR Environmental Management Programme Report Everest Everest Platinum Mine Great A PGE bearing layer within the Great Dyke Complex in Zimbabwe Dyke Reef g/t Grams per tonne, measurement unit of grade (1g/t = 1 part per million) JORC Australasian code for reporting of Mineral Resources and Ore code Reserves JSE JSE Securities Exchange South Africa Kroondal Kroondal Platinum Mine or P&SA1 at Kroondal LHD Load Haul Dump machine Marikana Marikana Platinum Mine or P&SA2 at Marikana Mimosa Mimosa Mining Company (Private) Limited MRC Murray & Roberts Cementation nm Not measured NOSA National Occupational Safety Association NUM South African National Union of Mineworkers PGE(s) Platinum Group Elements plus Gold. Five metallic elements (6E) commonly found together which constitute the platinoids (excluding Os (osmium)). These are Pt (platinum), Pd (palladium), Rh (rhodium), Ru (ruthenium), Ir (iridium) plus Au (gold) PGM(s) Platinum Group Metals plus Gold. Aquarius reports the PGMs as (4E) comprising Pt+Pd+Rh plus Au (gold) with the Pt, Pd and Rh being the most economic platinoids in the UG2 Reef P&SA1 Pooling & Sharing Agreement between AQPSA and RPM Ltd on Kroondal P&SA2 Pooling & Sharing Agreement between AQPSA and RPM Ltd on Marikana R South African Rand ROM Run of Mine. The ore from mining which is fed to the concentrator plant. This is usually a mixture of UG2 ore and waste. RPM Rustenburg Platinum Mines Limited SavCon The Savannah Consortium - the principal Black Empowerment Investor in Aquarius Platinum TKO TKO Investment Holdings Limited Ton 1 Metric tonne (1,000kg)
UG2 Reef A PGE bearing chromite layer within the Critical Zone of the
Bushveld Complex Z$ Zimbabwe Dollar
For further information please contact:
In Australia:Willi Boehm+61 (0)8 9367 5211
In the United Kingdom and South Africa
Nick Bias+ 44 (0)7887 920 [email protected]
vendorRelated Shares:
AQP.L