13th Jul 2005 06:04
AQUARIUS PLATINUM LIMITED13th July 2005AQUARIUS PLATINUM LIMITED "AQUARIUS" AND ANGLO PLATINUM LIMITED "ANGLOPLATINUM" AGREE TO CREATE A SECOND POOLED OPERATION AROUND MARIKANA MINE ANDSHARE IN AN ESTIMATED INCREMENTAL R1.6 BILLION (US$ 265 MILLION) OF REAL NETPRESENT VALUE INCREASE. * Aquarius and Anglo Platinum to form a second "pool and share" arrangement around Marikana Mine and Anglo Platinum mineral rights; * Each party to contribute certain assets and share 50:50 in the arrangement benefits; * Marikana to increase annual production to 250,000 PGM ounces (of which half will be owned by Aquarius Platinum (South Africa) (Pty) Ltd), and mine life extended by 10 years to 2024; * Marikana attributable PGM ore reserves inventory boosted from 1.31 million PGM ounces to approximately 2.20 million PGM ounces from October 2005; * The boundaries between the existing Kroondal P&SA and the new P&SA will be optimised to maximise value from both operations; and * An expected 900 new jobs will be created by this initiative. Aquarius announced today that its 50.5% owned subsidiary Aquarius Platinum(South Africa) (Pty) Ltd ("AQPSA") has entered into a second "pool and share"arrangement ("the Marikana P&SA" or "P&SA2") with Anglo Platinum in relation totheir respective mineral rights and assets at and around the Marikana Platinummine. The P&SA2, which is subject to certain suspensive conditions being metincluding both parties signing off on a development plan as per the Kroondal P&SA process, and regulatory approvals, is targeted to come into effect on 22ndSeptember 2005. The P&SA2 will extend the life of mine at Marikana by 10 yearsto 2024. This is the second South African operation where Aquarius iscooperating with Anglo Platinum after the two companies entered into theKroondal P&SA ("P&SA1") in June 2003. The P&SA2 provides Aquarius shareholderswith a further extension to the asset life profile. Venmyn (Pty) Ltd has actedas advisor to AQPSA in respect of value in this transaction.Stuart Murray, CEO of Aquarius commented, "This second pooling and sharingagreement with Anglo Platinum can be seen as an expansion of our successfularrangements at Kroondal. Marikana has suffered from the relatively high unitcosts of open cast mining coupled with lower than anticipated metallurgicalrecoveries. This period was also characterised by some of the lowest PGM basketprice receipts in Rand terms.This P&SA provides Marikana with quality underground UG2 ore, allowing theMarikana P&SA to realise a cost structure quite similar to our existingKroondal P&SA. Not only will the transaction move Marikana markedly down thecost curve, but earnings will be further enhanced by lower amortisation chargesas a result of the increase in the PGM mineral resources and ore reserves ofthis P&SA. Initially, and as happened in the Kroondal P&SA, Aquarius'attributable production at Marikana will be halved when the P&SA becomeseffective at the end of September. The attributable production will be builtback up to 125,000 PGM ounces per annum within 18 months through an expansionof the Marikana metallurgical facility.Moreover the mine life will be extended by 10 years and operating marginssignificantly enhanced. When we combine this new P&SA with the successfulKroondal P&SA and add the new production growth from our Everest project andthe planned Mimosa mini-expansion, the long-term production profile forAquarius has never looked better."Aquarius has recognised for some time that the best way to add value to itsMarikana operation is to replicate the successes emanating from P&SA1. It isforecast that significant synergies will be achieved as the enhanced Marikanaoperation will increase its mining life and mining flexibility in acost-effective manner in terms of both capital expenditure and operating costs.Operations will gradually change from a focus on large-scale opencast mining tounderground mining. This transition to primarily underground operations willtake around 18 months, although significant opencast operations will continuefor as long as they achieve reasonable cash margins. Utilising consensusmacroeconomic data it is expected that P&SA2 will add some R1.6 billion (US$265million) to the net present value of the partners' investment.The impact of P&SA2 on group earnings is expected to be positive for thecurrent financial year and significantly accretive thereafter as the fullbenefits of P&SA2 accrue. This improvement is due to increased plantthroughput, lower unit costs of underground mining, higher PGM recoveries fromunderground UG2 ore and lower amortisation charges.The total capital cost of P&SA2 is estimated at R228 million to be sharedequally by both parties. AQPSA will fund its portion of the capital for P&SA2from current cash flows and existing debt facilities.Marikana Ore Reserves and Production Attributable to AQPSA Before and After P&SA2 (planned date of pooling 22 September 2005)Attributable to AQPSA PRE - P&SA2 POST - P&SA2 Ore reserves (ROM tons) 12.88 million 22.17 million Ore reserves (PGMs 4E) 1.31 million ounces 2.20 million ounces Annual Production (ROM tons) 1.6 million 1.5 million Planned Annual Production (PGMs 4E) 120,000 ounces 125,000 ouncesThe new UG2 ore reserves, containing an estimated 3.1 million PGM ounces,contributed by Anglo Platinum in terms of the P&SA2 lie to the west of theKroondal Mine. It is value enhancing for the ore reserves to be mined and forthis ore to be delivered to the existing Kroondal concentrators. The reservesto the far east of Kroondal will be swapped and mined as part of the P&SA2 withthe ore from the new No.4 Shaft (which currently forms part of the P&SA1) to bediverted to the nearby Marikana concentrator. This arrangement will minimiseore transport costs for both the P&SA operations. A resultant adjustment to theore reserve boundary of the P&SA1 is shown in the diagram above. Importantly,this adjustment will ensure that the existing P&SA1 is left ounce and valueneutral.Key Terms of P&SA2AQPSA will provide access to the mineral rights vested in the Marikana Mine,all current plant and shaft infrastructure, management and other contractualoperating arrangements associated with the existing mine. Anglo Platinum willcontribute portions of its UG2 ore reserves owned by its subsidiary, RustenburgPlatinum Mines Limited ("RPM"). The agreement envisages the operation of asingle mining entity. However, both parties will retain ownership of the miningand mineral assets they contributed, with revenues, costs, capital expenditureand profits being shared equally.The current mineral resources and ore reserves attributable to the MarikanaMine at the pooling and sharing date amount to approximately 1.31 millionounces of PGMs. The ore reserves attributable to AQPSA rise to 2.2 millionounces of PGMs with the addition by RPM of approximately 31 million run of minetons of UG2.In terms of the project execution, the Marikana concentrator will be upgradedby retrofitting a dense media separation plant ("DMS") allowing the throughputof the existing concentrator to be increased to 250,000 run of mine ("ROM")tons per month ("tpm"). It is expected that the upgrade will be completed bythe end of calendar 2006. Mining at the existing West decline shaft on the RPMproperty will commence as soon as possible following fulfilment of allsuspensive conditions. This shaft will produce up to 175,000 ROM tpm. A secondshaft on the RPM property will be developed approximately two years later toraise production from the RPM ore-body to 240,000 ROM tpm. During the period ofdevelopment of these new declines, stoping operations will be stepped up atKroondal's Central, East and No. 3 shafts. The reallocated No. 4 Shaft willdeliver ore to the Marikana concentrator at a steady state rate of up to200,000 ROM tpm, with the balance of production being made up with existingopen cast and underground ores from the Marikana ore reserves.Although the parties will share in the proceeds of P&SA2 on a 50:50 basis,concentrate produced by Marikana will be split between Impala Refining ServicesLtd and Anglo Platinum in accordance with recovered ounces from the Marikanaand RPM ore-bodies respectively. The off-take agreement with Anglo Platinumwill be on the same terms as the existing off-take agreement between P&SA1 andRPM.Recognition has had to be given to the superior long-term option value of theRPM ore reserves. AQPSA and Anglo Platinum have therefore agreed to thefollowing terms in respect of P&SA2: -A. Principle of sharing "Super Profits": Super profits are defined as that cashoperating margin in excess of 50%. In the event of margins exceeding 50%, thesuper profit portion (that above the 50% margin threshold) will be split infavour of Anglo Platinum in the ratio 55% to Anglo Platinum and 45% to AQPSA;andB. A change of control provision : In the event of change of control ofAquarius it is agreed that Anglo Platinum may take over management of P&SA2 andfurther may elect, under specific circumstances, to purchase the AQPSA miningand mineral assets contributions to P&SA2 at an independently determined marketvalue.Neither of these provisions (A and B above) is applicable to the Kroondal P&SA.P&SA2 will employ the "Kroondal model" of mechanised wide-reef undergroundmining, coupled with DMS to improve ore quality prior to milling and flotation.The AQPSA management team will remain in place, reporting on a quarterly basisto a committee comprising an equal number of representatives from both AQPSAand Anglo Platinum.Marikana P&SA2Estimated Additional Ore Reserves Attributable to AQPSA at 22nd September 2005.Marikana UG2 Ore Reserves (100% attributable to AQPSA) Tons Pt g/ Pd g/t Au g/t Rh g/t 4E g/t Pt Moz 4E Moz million t Proven 12.35 1.62 1.17 0.30 0.03 3.09 0.64 1.23 Probable 0.95 1.62 1.17 0.30 0.03 3.55 0.05 0.11 Total (1) 13.30 1.62 1.17 0.30 0.03 3.12 0.69 1.34 Less 3 months production ounces July to September (ROM 420,000 tons) 0.03 Balance 1.31(1) An average reef width has not been shown due to high width variability, butapproximates 2.20m.Anglo Platinum UG2 Ore Reserve (100% Attributable to Anglo Platinum) Tons Pt g/ Pd g/t Au g/t Rh g/t 4E g/t Pt Moz 4E Moz million t Proven 31.46 1.86 0.90 0.31 0.03 3.10 1.88 3.14 Total (2) 31.46 1.86 0.90 0.31 0.03 3.10 1.88 3.10(2) An average channel width is 2.23m (0.16m Leader, plus 1.16m internal waste,plus 0.70m UG2, plus 0.20m footwall overbreak). 4E Moz Total ounces Pooled by AQPSA and Anglo Platinum in the P&SA2 4.41 Attributable to AQPSA (50%) 2.20 Less Marikana Ounces Attributable to AQPSA at 22 September 2005 as (1.31)shown above Uplift ounces attributable to AQPSA 0.90Note:The exchange of mineral resources and ore reserves for PSA2 considered thecomplexity of the different mineral resource blocks. This Ore Reserve Statementhas been prepared for JORC Code (Australasian Code for Reporting of ExplorationResults, Mineral Resources and Ore Reserves) compliance and shows the summarycomposition of the exchange. Work is on-going by both AQPSA and Anglo Platinumand further Mineral Resource and Ore Reserve figures will be disclosed whenavailable.The reserve estimate was compiled by Andrew Neil Clay who is a Member of theAusIMM with 10 years relevant experience to the mineralisation being reportedon and qualifies as a Competent Person as defined in the JORC Code.For further information please contact:In Australia : In South Africa : Willi Boehm Neil Collett - GM P&SA Projects Aquarius Corporate Services (Pty) Ltd Aquarius Platinum (SA) (Pty) Ltd +61 8 9367 5211 +27 83 653 7114 In the United Kingdom : In South Africa : Nick Bias Charmane Russell Aquarius Platinum Limited Russell & Associates +44 7887 920 530 +27 11 880 3924 / +27 82 376 2327 ENDAQUARIUS PLATINUM LIMITEDRelated Shares:
AQP.L