8 Aug 2012 07:00
AQUARIUS PLATINUM LIMITED
PRELIMINARY FULL YEAR RESULTS TO 30 JUNE 2012
Key Points: Financial
Revenue decreased by 29% to $486 million (FY2011: $683 million)
Mine operating net cash flow decreased by 85% to $26 million (FY2011: $176 million)
Mine EBITDA decreased by 86% to $29 million (FY2011: $206 million)
Headline loss (before exceptional charges) of $154 million (FY2011: headline earnings $143 million)
Headline loss per share of US 32.88 cents per share
Reported net loss of $158 million (US 33.77 cents loss per share) after forex loss of $97 million on the revaluation of inter-company loans
Group cash balance at FY close of $180 million
No dividend declared (FY2011: US 8 cents)
Key Points: Operational
Group attributable production decreased by 14% to 411,398 PGM ounces for the full year
US Dollar PGM prices decreased materially, partially offset in South Africa by weaker Rand-US Dollar exchange rate
Average Rand Basket Price flat year-on-year at just over R10,300 per PGM ounce
Weighted average on-mine unit cash costs in South Africa increased by 39% in Rand terms
Operations suspended at Marikana and Everest mines due to low Rand PGM prices
Key Points: Strategic
Moving to tested hybrid hangingwall support methodology to retain complete mine safety while enhancing profitability
Moving to Owner Operator model - contractor arrangement with mining services provider, Murray & Roberts Cementation (MRC) terminated
Focus on a turnaround at Kroondal
All unprofitable operations have been placed on care and maintenance for the duration of the current downturn
Commenting on the results, Stuart Murray, CEO of Aquarius Platinum said:
"The last financial year has been an exceptionally challenging one for the Company and indeed for many players in the SA PGM industry. Company specific operational performance issues, a significant drop in the Rand price basket especially since February coupled with rising input costs in SA and Zimbabwe, poor labour relations at the primary mining contractor in SA, and unreasoned safety stoppages all combined to deliver an unfortunate operational and financial outcome for Aquarius. Whilst some of the issues are Company specific, the general operating environment combined with the poor pricing conditions place the South African PGM sector under real pressure.
Aquarius has felt these impacts but has swiftly resolved to conserve cash and protect the value of its in-the-ground reserves and resources by placing Marikana and Everest under care and maintenance. This is a responsible reaction to the price environment as sustained production surpluses merely raise the level of above-ground metals inventory. The unfortunate side of this decision is the human cost of job-losses but some success has been achieved in placing about one thousand employees into alternative employment. As the market recovers - and there is no reason to doubt that it will - Aquarius will be well placed to re-build its production profile."
Financial results: Year to 30 June 2012
Aquarius' consolidated result for the financial year ended 30 June 2012 was a loss of $154 million (33.77 cents per share). The result includes a foreign exchange loss (forex) of $97 million arising substantially from the revaluation of intercompany loans within the group.
Headline Earnings, Profit & Production Comparison by Half Year & Full Year (FY2012 & 2011) 1st 2nd half half FY2012 FY2011 Movement FY 2012 FY 2012
Headline earnings/(loss) ($113M) ($41M) ($154M) $143M ($297M)
EBITDA $30M ($1M) $29M $206M ($177M)
Foreign exchange gain/ ($91M) ($4M) ($95M) $60M ($155M)
(loss) Net profit before ($136M) ($49M) ($185M) $185M ($370M) impairment Impairment - ($4M) ($4M) ($160M) $156M
Net profit/(loss) after ($113M) ($45M) ($158M) ($10M) ($148M)
impairment and tax
Profitability at mine level (on-mine EBITDA) was $29 million compared to $206 million in the previous corresponding period (pcp) due to challenging operating conditions experienced at the Group's South African operations, increased mining costs and lower PGM metal prices. Decreasing metal prices caused a negative $31 million sales adjustment to be incurred.
Revenue (PGM sales, interest) for the year was $486 million, down 29% from $683 million in the pcp. The decreased revenue compared to FY2011 was a result of reduced production down 14% and lower PGM prices down 17% in dollar terms (and down 9% in Rand terms). Measured on a PGM ounce basis, group revenue decreased by 17% to $1,158 per PGM ounce from $1,395 per PGM ounce in the pcp.
Group attributable mine production for the period was 411,398 PGM ounces, down 14% from the pcp.
Total cash cost of production was $531 million, up 22% per PGM ounce in Dollar terms (and 34% in Rand terms) as a result of increased difficulties experienced in the mining process. These included mining contractor underperformance and temporary operational issues encountered as a result of the implementation of a revised underground hangingwall safety support regime as well as a significant increase in the incidence of so-called "section 54" safety stoppages. Unfortunately industrial action as a result of inter union rivalry particularly during the second half was an added complication to the operating challenges noted above.
Group gross cash margin decreased to 4% from 35% due to a combination of higher mining costs and lower PGM metal prices. PGM basket prices achieved (i.e. after smelter payability) decreased 17% to $1,158 per PGM ounce reflecting the low PGM price environment.
Average unit cash costs for FY2012 were $1,131 per 4E ounce, up 21% compared to FY2011. The average cash cost per PGM ounce at the South African operations increased by 39% to R9,708, equivalent to $1,254 per PGM ounce at the average Rand exchange rate for the year. The increase in US dollar terms was 26%, as a result of a stronger dollar relative to the Rand during the year. Lower production in South Africa, down 18% also contributed to higher unit costs as the ability to spread fix production costs diminishes. In Zimbabwe the cash cost per PGM ounce was $752, an 8% increase. Increases in cash costs were driven by inflationary factors affecting inputs such as labour, electricity, steel and diesel.
Exchange rate movements continued to have a volatile effect on earnings with a $95 million forex loss recorded in the financial year. This consisted of a $26 million gain on adjusting revenue recorded at the time of production to realised receipts received at the end of the four month pipeline, $97 million loss on the revaluation of intercompany loans, $18 million loss on pipeline advances and a $6 million loss incurred on the revaluation of net monetary assets.
Amortisation and depreciation expenses (D&A) incurred totalled $66 million (FY 2011: $62 million) due to additional plant and equipment as Everest and $5.5 million of write-offs following closure of the Marikana open pit.
Corporate administration expenses of $12 million was comparable to the prior period. Finance costs for the year of $35 million included $19 million interest on convertible notes and bank borrowings, $10 million accretion of the interest component of the convertible note debt, $5 million non-cash interest arising from the unwinding of the net present value of the rehabilitation provisions of AQPSA and $1 million pipeline interest.
Income tax benefit comprises a $46 million deferred tax credit, offset by $10 million normal tax, $4 million withholding tax and $1 million royalties.
1st 2nd half half FY2012 FY2011 Movement FY 2012 FY 2012 Revenue $252M $234M $486M $683M ($197M) PGM ozs production 215,453 195,945 411,398 487,404 * * * * (76,006) (in operation*) Average revenue per PGM ounce $1,154 $1,163 $1,158 $1,395 ($237) achieved
*excludes PGM ounces of Blue Ridge production capitalised.
Group Financials by Operation
Kroondal Marikana Everest Mimosa PMR CTRP Blue Corporate Total Ridge PGM ounces (4E) 167,425 51,370 72,993 105,447 11,706 2,457 - - 411,398
(attributable) $M Revenue 180 57 84 143 11 2 - 8 486 Cost of Sales - mining, (189) (68) (114) (80) (9) (3) - (1) (465)processing & admin Cost of Sales - depreciation (23) (15) (13) (10) (4) - - - (66)& amortisation Gross profit/ (32) (25) (43) 52 (2) (1) - 6 (45)(loss) Other income - - - - - - - 2 2 Corporate - - - - - - - (12) (12)administration Foreign exchange gain/ 12 3 1 - - - - (112) (95)(loss) Finance costs - - - - - - - (35) (35) Impairment - - - - - - (4) - (4)losses Profit before (19) (22) (42) 52 (2) (1) (4) (150) (189)income tax Cash Balances
Net operating cash flows for the year generated by the group's mining operations decreased 85% to $26 million in line with lower production and lower prices achieved compared to the pcp. Other cash flows included $95 million for mine development, $12 million for acquisition of Platinum Mile, $15 million deposit paid on the Booysendale acquisition, $18 million interest paid, $15 million proceeds from borrowings and $19 million dividends paid.
Group cash balance at 30 June 2012 was $180 million representing a decrease of $148 million over the pcp.
Aquarius is of the view that its present cash reserves are sufficient to manage its operating mines for the next twelve months based on present market dynamics but point out that Aquarius will need to secure additional funding if it was required to conclude the Booysendale acquisition. In noting the necessity for securing additional capital, Aquarius is taking advice on a number of alternatives.
Group Debt
Group interest bearing debt (excluding pipeline advances) at 30 June 2012 of $304 million comprised $257 million convertible notes, $12 million AQPSA equipment leases and $35 million bank loans at subsidiary level.
Ridge assets
As previously disclosed, Blue Ridge has been closed for redevelopment since August 2010. During FY2012 $4 million (50% attributable to Aquarius) was expensed whilst the operations remained on care and maintenance. The Blue Ridge mine remains on care and maintenance.
Impairment assessment of mines
As previously disclosed, the partners in the Marikana Pooling & Sharing Agreement agreed to place the P&SA2 operations on care and maintenance, due to the enduring low PGM basket price environment. In addition, Aquarius also placed its Everest mine on care and maintenance in June 2012. These decisions were made in the interests of preserving the ore reserves until an improved economic climate merits their extraction in the future.
Aquarius has assessed the carrying value of its mines to determine if an impairment charge be recognised should the accounting carrying value exceed the recoverable amount of the assets. Various methods have been undertaken to determine the recoverable amount of the assets. Accounting standards state that the recoverable amount is the higher of value in use and fair value (an arm's length sale value).
To determine the value of the mines, Aquarius has considered its own internal modelling using consensus macros as well as external modelling to determine the carrying value of the mines. On the basis of the above reports, management has concluded that the carrying value of its assets are appropriate.
Rand-US Dollar Exchange Rate
The Rand weakened significantly over the 2012 financial year, starting the year at R6.80 to the US Dollar and ending it at R8.24. This 22% fall in the value of the currency was largely driven by the debt crisis in Europe, as the European Union is South Africa's largest trading partner and there has historically been a relatively close correlation between the Euro and the Rand. The Rand averaged 7.78 to the US Dollar during the year, 11% weaker than the average of 7.01 recorded in the prior financial year.
Financial Year 2012: Rand US Dollar Exchange Rate
[See www.aquariusplatinum.com for graph]
Platinum Group Metal Prices
Platinum group metals prices weakened considerably in US Dollar terms over the period under review, primarily as a result of falling investor perception relating to Europe and the abiding and much-publicised surplus across the entire suite of metals. Fundamental demand for these metals continues to grow, but the worsening situation for European auto and its implications for platinum demand have slowed this growth. On the supply side, the industry is producing slightly less, but none of the major producers have indicated a willingness to cut production in any meaningful way. The result is a continuing surplus that will take some time to work through, as emissions standards are implemented for heavy duty trucks and other diesel applications in Europe and the US, and auto emissions regulations are rolled out in developing world nations. Chinese jewellery demand has remained robust, as platinum traded at a discount to gold for much of the year. Platinum fell 16% over the year to close at $1,428 per ounce and averaged $1,601 per ounce for the financial year, a 6% decline over the prior year. Palladium fell 23% over the year and 1% on average, while the average rhodium price fell by 32% versus the prior year, lacking support from any material investment demand. Gold rose by 6% during the period.
Financial Year 2012: Platinum, Palladium, Rhodium and Gold Prices
[See www.aquariusplatinum.com for graph]
As a consequence of the weaker US Dollar PGM prices during the year, US Dollar 4E basket prices in both South Africa and Zimbabwe decreased compared to the prior financial year. The basket price was 9% lower for the year across the South African operations at $1,325 per 4E ounce, however in Rand terms the basket price was flat as a result of the weaker Rand-Dollar exchange rate. The US Dollar basket price in Zimbabwe remained flat at $1,277 per 4E ounce compared to $1,280 per 4E ounce in the previous year.
Financial Year 2012: PGM Basket Prices (4E)
[See www.aquariusplatinum.com for graph]
Production
Total production from all operations in the 2012 financial year decreased by 14% to 739,109 4E ounces. Production attributable to Aquarius and its shareholders decreased by 16% to 411,398 4E ounces, as a result of operational problems resulting from the new hangingwall support regime, as well as labour relations issues at Everest. Everest and Marikana were placed on care and maintenance at the end of the year under review, as they had remained unprofitable throughout the year. Production focus is now on Kroondal, Mimosa and the tailings operations. All of the South African operations suffered excessive governmental safety stoppages during the first half of the year, as did the rest of the mining industry, but these have now improved. In Zimbabwe, Mimosa yielded yet another outstanding performance, once again producing in excess of its nameplate capacity of 200,000 4E ounces. The chart below illustrates the annual production profile.
Aquarius Group Attributable Annual Production (4E PGM ounces)
[See www.aquariusplatinum.com for graph]
The tables below compare production by operation and attributable to Aquarius over the four quarters and year-on-year.
Production by Mine
Quarter Ended Full Year EndedPGMs (4E) Sep-11 Dec-11 Mar-12 Jun-12 FY 2011 FY 2012 Kroondal 88,908 86,796 76,934 82,212 414,946 334,850 Marikana 25,992 28,809 26,405 21,533 105,924 102,739 Everest 23,074 18,712 15,926 15,281 100,252 72,993 Mimosa 53,798 50,456 52,052 54,588 208,016 210,895 CTRP 661 1,109 1,412 1,732 4,876 4,914
Platinum Mile 3,087 3,328 3,473 2,831 11,417 12,719
Blue Ridge - - - - 17,707 - Total 195,520 189,210 176,202 178,177 863,138 739,109
Production by Mine Attributable to Aquarius
Quarter Ended Full Year EndedPGMs Sep-11 Dec-11 Mar-12 Jun-12 FY 2011 FY 2012 Kroondal 44,454 43,398 38,467 41,106 207,473 167,425 Marikana 12,996 14,405 13,202 10,767 52,962 51,370 Everest 23,074 18,712 15,926 15,281 100,252 72,993 Mimosa 26,899 25,228 26,026 27,294 104,008 105,447 CTRP 331 554 706 866 2,438 2,457
Platinum Mile 2,074 3,328 3,473 2,831 11,417 11,706
Blue Ridge - - - - 8,854 - Total 109,828 105,625 97,800 98,145 487,404 411,398 FINANCIALSAquarius Platinum Limited
Consolidated Income Statement
Year ended 30 June 2012$'000 Half year ended Year ended Note 30/06/12 31/12/11 30/06/12 30/06/11 Blue Ridge - - - 8,854 Attributable Production (4E PGM Ounces) 215,453 195,945 411,398 478,550 (excluding Blue Ridge production) Total production 215,453 195,945 411,398 487,404 Revenue (i) 233,355 252,381 485,736 682,859 Cost of Sales (ii) (258,217) (272,952) (531,169) (507,728) (including D&A) Gross profit/(loss) (24,862) (20,571) (45,433) 175,131 Other income 968 1,108 2,076 1,764
Corporate admin & other (iii) (4,556) (7,394) (11,950) (13,030)
costs
Finance costs (iv) (17,091) (17,583) (34,674) (30,945)
Foreign exchange gains/ (v) (3,712) (91,289) (95,001) 60,068
(losses) Settlement of - - - (7,810) contractor dispute Impairment of assets (vi) (3,983) - (3,983) (159,779) Profit/(loss) before (53,236) (135,729) (188,965) 25,399 tax Income tax benefit/ (vii) 8,441 22,237 30,678 (35,795) (expense) Net profit/(loss) (44,795) (113,492) (158,287) (10,396) Earnings per share (9.46) (24.31) (33.77) (2.25) (basic - cents)
Notes on the June 2012 Consolidated Income Statement
Sales revenue increase reflects lower production and lower PGM basket price achieved.
Cash costs in South Africa in unit terms increased by 26% in US Dollar terms and 39% in Rand terms due to a 10% average decrease in the value of the Rand compared to the US Dollar.
Corporate administration costs are comparable to the prior period.
Finance costs comprised interest of $29 million on convertible notes and bank borrowings, $1 million pipeline interest and $5 million of non-cash interest arising from the unwinding of the net present value of the rehabilitation provisions of AQPSA.
Foreign exchange loss of $95 million includes a $27 million gain on adjusting revenue recorded at time of production at Kroondal, Marikana and CTRP to realised receipts received at the end of the four month pipeline, $98 million loss on the revaluation of group loans, $18 million loss on pipeline advances and a $6 million loss incurred on the revaluation of net monetary assets.
Reflects impairment charges for Ridge assets.
Income tax comprises $46 million deferred tax credit, offset by $10 million normal tax, $4 million withholding tax and $1 million royalties.
Aquarius Platinum Limited
Consolidated Cash flow Statement
Year ended 30 June 2012$'000 Half year ended Financial year ended Note: 30/06/12 30/06/11 30/6/12 30/6/11 Net operating cash flow (i) 2,632 24,948 27,580 175,915 Net investing cash flow (ii) (50,858) (69,221) (120,079) (209,908) Net financing cash flow (iii) (1,399) (34,350) (35,749) (47,131)
Net increase/(decrease) in cash held (49,625) (78,623) (128,248) (81,124)
Opening cash balance 230,127 328,083 328,083 381,734
Exchange rate movement on cash (iv) (414) (19,333) (19,747) 27,473
Closing cash balance 180,088 230,127 180,088 328,083
Notes on the June 2012 Consolidated Cash flow Statement
Net operating cash flow includes net inflow from operations $28 million, interest received of $9 million, income tax paid $11 million and other income of $1 million.
Net investing cash flow includes payments for mine development and development costs $95 million, acquisition of Platinum Mile $12 million and deposit on Booysendale acquisition $15 million.
Net financing cash flow includes interest paid $19 million, proceeds from borrowing $15 million and dividends paid of $19 million.
Exchange rate movement reflects movement of other currencies against the USDollar. Aquarius Platinum Limited Consolidated Balance Sheet At 30 June 2012 $'000 Financial year ended Note: 30/06/12 30/06/11 Assets Cash assets 180,088 328,083 Current receivables (i) 87,100 108,395 Other current assets (ii) 44,258 44,747 Property, plant and equipment (iii) 276,195 325,763 Mining assets (iv) 437,574 480,634 Other non-current assets (v) 88,093 91,735 Intangibles (vi) 87,882 77,989 Total assets 1,201,190 1,457,346 Liabilities Current liabilities (vii) 116,727 120,549 Non-current payables (viii) 4,204 6,150
Non-current interest-bearing liabilities (ix) 262,265 257,599
Other non-current liabilities (x) 141,349 221,711 Total liabilities 524,545 606,009 Net assets 676,645 851,337 Equity Issued capital 23,516 23,509 Unissued shares 2,436 - Treasury shares (18,128) (16,190) Reserves 722,734 727,372 Retained earnings (60,195) 116,646 Non-controlling interests 6,282 - Total equity 676,645 851,337
Notes on the June 2012 Consolidated Balance Sheet
Reflects debtors receivable on PGM concentrate sales.
Reflects PGM concentrate inventory, consumables, stores and critical spares.
Represents fixed assets within the Group.
Includes group's mining assets at Kroondal, Marikana, Mimosa, Everest, Blue Ridge, CTRP and Platmile
Includes recoverable portion of rehabilitation provision at P&SA sites of $11 million, cash contributed to Rehabilitation Trusts of $18 million, listed investments of $3 million and $29 million owed by the RBZ to Mimosa relating to the previous requirements to repatriate US Dollar proceeds on metals sales to the RBZ.
Includes intangibles relating to acquisition of Platmile Resources
Includes trade creditors $73 million and Blue Ridge bank loans $27 million, which is not guaranteed by Aquarius
Reflects P&SA partners' right of recovery of rehabilitation provisions.
Includes convertible notes of $257 million and AQPSA vehicle leases of $5 million.
Reflects deferred tax liabilities of $98 million and provision for closure costs of $43 million.
OPERATING REVIEW
This section contains summarised operating reviews of each of the Company's operations. Full operating statistics are provided on page 22 of this report, and other updates relevant to all operations can be found under Corporate Matters on page 21. In addition, further detail on each of the operations can be obtained from the quarterly and half-yearly reports released by the Company throughout the 2012 financial year which are available on the Company's website, www.aquariusplatinum.com.
AQUARIUS PLATINUM (SOUTH AFRICA) (PTY) LTD ("AQPSA") (Aquarius Platinum - 100%)
P&SA 1 at Kroondal (Aquarius Platinum - 50%)
12-month rolling average DIIR deteriorated to 1.20 per 200,000 man hours from 0.77 the previous year
Production deteriorated by 9% to 5.6m tonnes
Volumes processed to 5.6m tonnes
Head grade deteriorated to 2.38 g/t
Recoveries weakened by 2% to 78% due to instability in processing created by stop/starting of the plants
PGM production reduced by 19% to 334,850 PGM ounces
Revenue deteriorated by 26% to R2.8 billion compared to the previous financial year due to lower production
Mining cash costs increased by 26% to R524 per tonne, and costs per PGM ounce by 39% to R8,748
Kroondal's cash margin for the period fell from 30% to (6)%
P&SA2 at Marikana (Aquarius Platinum - 50%)
12-month rolling average DIIR improved to 0.47 per 200,000 man hours from 0.48 the previous year
Production decreased by 6% to 1.8m tonnes, with an increase of 12% from underground operations as the open pit was ramped down and depleted during the year
Volumes processed decreased to 1.8m tonnes
Head grade decreased by 1% to 2.32 g/t
Recoveries were stable at 75%
PGM production decreased by 3% to 102,739 ounces
Revenue decreased by 12% to R869 million compared to the previous financial year due principally to the reduction in PGM ounce production
Mining cash costs increased by 26% to R575 per tonne, and costs per PGM ounce by 22% to R10,208
Marikana's cash margin deteriorated from 10% to (21)%
Commentary - Kroondal and Marikana
Safety, Health and Environment
Regrettably, two fatalities occurred at Kroondal during the 2012 financial year. During October 2011, Mr Hennie Otto was fatally injured in a lifting and equipment handling incident at a Kroondal K1 processing Plant, and on the 17 April 2012 Mr Tomas Ubissi a utility vehicle operator passed away in a fall of ground accident at Kroondal Simunye Shaft.
Operations
Kroondal and Marikana: Mine production continued to be negatively impacted by the implementation of the new hangingwall support regime as manual drilling of support holes remained necessary during much of the year. Slower-than-plan installation of support thus continued to interfere with the blasting cycle. The change in mining orientation also continued to require the establishment of additional face at the expense of head grade. Both of these issues are presently being resolved, with a return to optimum mining orientation and a hybrid hangingwall support regime underway. This will enable an improvement at Kroondal but due to the high incidence of poor ground conditions at Marikana a return to a hybrid hangingwall support regime is not possible and hence this mine has been placed on care and maintenance pending an increase in PGM prices.
Production in the period was significantly below capacity, which had a negative effect on unit costs due to the high fixed cost base. The extent of the fixed cost base is a feature of the mining contractor agreement across Aquarius's South African operations, and this agreement was terminated in the final quarter of the year.
Rustenburg Platinum Mines' (RPM) Siphumelele 3 ore reserves were included in both P&SA1 and P&SA2 and mining there has commenced, in accordance with an agreement between RPM and AQPSA. However, the Siphumelele 3 shaft itself has now been placed on care and maintenance pending improved PGM prices.
An elevated incidence of Section 54 safety stoppages issued in the Rustenburg district negatively affected production during the first half of the year. A dialogue has been established with the new Principal Inspector of the region, and this has improved this situation materially.
The third quarter was severely impacted by a reduction in the number of production shifts in January, caused by seasonal absenteeism relating to the Christmas and New Year holidays which, together with Section 54 safety stoppages ("S54s") issued to the two mines, resulted in the loss of 15 production days.
At Marikana, the M5 Shaft project and the Siphumelele (Bleskop) shaft were placed on care and maintenance on 27 March 2012 until further notice, as a result of the current low Rand basket prices.
Production at Kroondal improved over the fourth quarter, but remained disrupted by the current hangingwall support regime. Production at Kroondal is expected to trend back towards full capacity by the end of the calendar year. However, unlawful strike action has occurred intermittently at Kroondal's Kwezi Shaft during July, accompanied by incidents of intimidation and violence as a result of the continuing tensions between rival mining unions on the Western Limb of the Bushveld. This strike has now been resolved, but industrial relations in the Rustenburg district remain strained.
Operating Cash Costs
Cash costs increased by 39% at Kroondal and by 22% at Marikana over the year, due largely to the fixed cost base impacting on lower than optimal mining volumes, as well as the addition of costs associated with the new safety measures, and inflationary factors linked to electricity, labour and steel.
Update on recent serious security breach at Kwezi Shaft
As previously announced, on 1 August 2012 a very serious security incident occurred at Kwezi shaft, a production unit at the Kroondal PSA near Rustenburg in the North West Province. A gathering of approximately 200 people, some of whom were armed, forced their way onto the mine property. Members of the private security company under contract to the mine attempted to disperse this unruly crowd as the actions of the group, which included the throwing of petrol bombs, threatened both mine employee lives and property. A total of 450 employees were on the shaft and underground at the time of this invasion. Six people died and at least 20 others were injured in this incident. The people are understood to be former employees of the mine's mining contractor, who were dismissed following illegal strike action in June 2012.
Following the intervention of the South African Police Services (SAPS), the situation has calmed and production has returned to normal. Mine management continues to liaise with the SAPS, and officials of both the National Union of Mineworkers and the Department of Mineral Resources to assess this situation and action any outcomes from ongoing investigations.
Everest Mine (Aquarius Platinum - 100%)
12 month rolling DIIR deteriorated to 2.24 per 200,000 man hours from 0.41 the previous year
Production deteriorated by 9% to 1.2m tonnes
Volumes processed reduced to 1.2m tonnes
Head grade deteriorated from 2.76 g/t to 2.28 g/t
Recoveries remained stable at 82% PGM production deteriorated by 27% to 72,993 PGM ounces
Revenue decreased by 36% to R643 million compared to the previous year
Mining cash costs increased by 30% to R727 per tonne, but costs per PGM ounce increased by 58% to R12,120
Everest's cash margin deteriorated from 23% to (38%)
Commentary - Everest
Safety, Health and Environment
Regrettably, two fatalities occurred at Everest during the financial year under review. Regrettably Mr C Venter, a shiftboss working for Precrete lost his life at Everest in a motor vehicle accident on the 18 July 2011 and Mr D Sebulela, a Rock Drill Operator working for MRC, passed away after a fall of ground accident on the 7 of September 2011. The DIIR also deteriorated compared to the previous year, which is unacceptable. Everest has now been placed on care and maintenance but safety will be a focus when it is returned to production, as AQPSA will be the operator and will have full control, in keeping with the Aquarius commitment to safe operations.
Operations
Mining during the year was negatively impacted by oxidised ore and resulting poor ground conditions, section 54s and maintenance issues. This was exacerbated by a protected strike in the second quarter by certain employees of the mining contractor. The strike was called by the Association of Mining and Construction Unions ("AMCU"), which demanded full organisational rights from MRC in terms of the South African Labour Relations Act. The strike was ended by AQPSA coming to an interim arrangement with AMCU while their dispute with MRC continued. As a consequence of the strike, Everest was unable to operate for in excess of two weeks.
The eastern side of Everest is within the last 18 months of its life, and is being replaced by the reserves on the western side. As mining has proceeded into the shallower extremities of the orebody, the oxidised zone has been encountered with the associated poor ground conditions and grade reductions. Given this development, it was anticipated that underground production could be slowed, and supplemented by a targeted 3,000 4E ounces per month of production from the Hoogland opencast pit. However, notwithstanding the fact that the application for converting the exploration right at Hoogland into a mining authorisation was submitted in May 2011, it has yet to be approved by the DMR, a delay occasioned by, among other things, a jurisdictional dispute between the DMR regional offices of Mphumalanga and Limpopo.
As with Kroondal and Marikana, absenteeism and the associated loss of production shifts negatively impacted production in the third quarter. The mine also suffered further "go-slows" at the hands of labour and the AMCU union. Mining at several panels also had to be stopped for safety reasons due to poor ground conditions during this quarter. The lower achieved head grade is related to the poor ground conditions, as the majority of tons are currently being mined in the northern portions of the eastern part of the mine.
Given the issues described above, the Everest mine has been placed on care and maintenance until further notice, as a result of the current low Rand basket prices, temporary geological problems and unstable labour relations.
Operating Cash Costs
Unit cash costs in Rand terms rose significantly compared to the prior year, as the ramp-up in production did not materialise and the full effect of the mine's fixed cost base continued to be felt.
AQPSA Operating costs per ounce (R/oz)
4E 6E 6E net of by-products (Pt+Pd+Rh+Au) (Pt+Pd+Rh+Ir+Ru+Au) (Ni&Cu) Kroondal 8,748 7,171 7,040 Marikana 10,208 8,397 8,165 Everest 12,120 10,041 9,679 AQPSA Capital expenditure
All stay-in-business capital expenditure for the AQPSA operations is up-to-date as per the mine plans for the specific operations. The ongoing construction of the K6 shaft at Kroondal cost approximately R163 million of development capital expenditure in the 2012 financial year, and will require a further R158 million in the 2013 financial year.
Kroondal Marikana Everest
(R'000 unless otherwise stated) Total Per 4E oz Total Per 4E oz Total Per 4E oz
Ongoing Infrastructure Establishment 190,360 568 100,080 974 95,343 1,306
Project Capital 163,638 489 269 3 5,714 78 Mobile Equipment 141,918 424 9,737 95 1,445 20 Total 495,916 1,481 110,086 1,072 102,503 1,404
MIMOSA INVESTMENTS (Aquarius Platinum - 50%)
Mimosa Platinum Mine
12-month rolling average DIIR deteriorated to 0.24 per 200,000 man hours from 0.03 the previous year
Production decreased by 4% to 2.3m tonnes
Volumes processed increased by 1% to 2.3m tonnes
Head grade improved by 1% to 3.65g/t
Recoveries were maintained at 77%
PGM production increased by 41% to 210,895 PGM ounces
Revenue decreased by 16% to $285 million due to lower basket price
Mining cash costs increased by 12% to $70 per tonne, PGM ounce cost increased by 11% to $769
Mimosa's cash margin for the period decreased to 47% from 57%
Commentary
Safety, Health and Environment
No fatalities occurred at Mimosa during the 2012 financial year. Very few lost-time injuries were reported during the year, with a commensurate improvement in the DIIR.
Operations
The Mimosa mine itself continues to operate well. However, the Zimbabwean political and regulatory environment has remained challenging for all mining companies operating in the country.
Power
Mining operations were adversely affected by load shedding during the second and third quarters. The load shedding was caused by limited electricity imports to supplement the low domestic electricity generation capacity. Local power generation continues to require augmenting by imports from Hydro Cabhora Basa (HCB) of Mozambique, which threatened to cut off supply to ZESA for long outstanding arrears. Following an agreement between Mimosa and ZESA reached in late March 2012 guaranteeing uninterrupted power supply of 20MW for the next five years, Mimosa has experienced no issues with electricity supply. Quarterly meetings are being held with ZESA senior management to discuss potential power disruptions and ways to improve reliability of power supply.
Mining Fees
Discussions are still ongoing between the Chamber of Mines and the relevant authorities concerning the issue of increased mining fees. It is hoped that the discussions will result in reduced and sustainable mining fees. If the proposed fees are implemented, this would have a significant negative impact on operating costs.
Offshore accounts
Mimosa formerly operated offshore accounts domiciled in London and Mauritius. Mimosa has now complied with the directive by the Reserve Bank of Zimbabwe requiring all companies to localise offshore accounts in Zimbabwe. To date this has not negatively impacted the mine`s operations. Payments, including foreign outflows, have continued to be processed smoothly.
Indigenisation
As part of the fulfilment of the indigenisation and Empowerment Act, Mimosa officially launched the Zvishavane Community Share Trust on 16 February 2012. Meanwhile discussions continue between Mimosa and the Government of Zimbabwe in relation to the terms and conditions on which Mimosa will comply with the legal requirements pertaining to the Indigenisation legislation of Zimbabwe.
Taxes and Government Royalties
Royalties for gold and platinum were increased with effect from 1 January 2012 to 7% and 10% of revenue respectively, putting more pressure on costs. Corporate tax has remained at 25%. Review of the Income Tax Act is still underway and is expected to be finalised during the second half of the calendar year.
Operating Cash Costs
Cost increases during the year were attributable to deteriorating ground conditions and the associated use of additional equipment. Sales-related costs such as royalties, commission and technical fees were below budget, in line with lower sales revenue. However, royalties were higher than budget owing to the increase in rates on platinum and gold metals.
Operating cash costs per ounce ($/oz)
4E 6E 4E net of by-products (Pt+Pd+Rh+Au) (Pt+Pd+Rh+Ir+Ru+Au) (Ni, Cu & Co) Mimosa 752 712 396 Capital expenditure
Capital expenditure at Mimosa for the 2012 financial year was $61 million ($291 per PGM ounce), spent largely on housing projects and stay in business capex.
TAILINGS OPERATIONS
Chromite Tailings Retreatment Plant (CTRP) (Aquarius Platinum - 50%)
Material processed increased by 169% to 327,000 tonnes
Head grade decreased marginally to 2.90 g/t
Recoveries decreased by 62% to 16%
Production increased by 1% to 4,914 PGM ounces
Cash costs increased by 20% to R8,661 per PGM ounce
Revenue decreased by 30% to R34 million for the financial year
The cash margin for the period was (31%), a decrease from (1%%) the previous year
Platinum Mile (Aquarius Platinum - 91.7%)
Material processed increased by 9% to 4.8m tonnes
Head grade decreased by 24% to 0.52 g/t
Recoveries decreased by 30% to 16%
Production decreased by 44% to 12,719 PGM ounces
Cash costs increased by 36% to R6,506 per PGM ounce due to improved grades and recoveries
Revenue decreased by 50% to R100 million for the financial year
The cash margin for the period was 13%, an increase from 45% the previous year
CommentaryCTRP:
A project to install a thickener at the plant has been started. This should result in finer material being presented to the fine grind mill to improve recoveries. Metallurgical test work on the effects of grinding on recoveries has been completed and the results are due to be presented to the Management Board for approval.
Platinum Mile:
The decrease in recoveries was directly related to the decrease in the head grade of feed material. The operation still achieved a positive cash margin in the current difficult market conditions. During the final quarter three used coarse grinding mills were purchased from Anglo Platinum for R10 million. The civil and electrical design work has commenced and these mills should come into operation in February 2013. The coarse grinding circuit should yield an additional 480 PGM ounces per month and the total capital cost for this expansion is expected to be around R20 million.
Operating cash costs per ounce (R/oz)
4E 6E 4E net of by-products (Pt+Pd+Rh+Au) (Pt+Pd+Rh+Ir+Ru+Au) (Ni, Cu& Co) CTRP 8,661 8,160 8,020 Platinum Mile 6,506 5,652 5,036 CORPORATE MATTERS
Premium Listing on the London Stock Exchange
On 28 November 2011, Aquarius completed its transfer of listing category from a standard listing to a premium listing (commercial company) on the Official List of the UK Listing Authority.
"Domestic" listing in South Africa
Aquarius is listed on the JSE in South Africa via an "inward-bound dual listing", a status which has historically signified that Aquarius' shares are to be treated as foreign assets for the purposes of Exchange Control. This has imposed limitations on South African institutions and individuals holding Aquarius shares. In his 2011 Medium Term Budget speech, the South African Minister of Finance proposed that such shares be henceforth treated as "domestic" for the purposes of trading on the JSE, and be eligible for index inclusion. On 12 January 2012, the JSE announced that the shares of all companies with inward-bound dual listings, including Aquarius, will be treated as domestic with immediate effect. As a result there are no longer any restrictions on South Africans holding Aquarius shares, and subject to free float requirements, Aquarius is be eligible for inclusion in the JSE equity indices.
Update on Zimbabwean Indigenisation
Mimosa has confirmed its willingness to sell 51% of its shares to Zimbabwean entities and thereby to comply with the law requiring 51% local ownership of foreign-owned companies. The Government of Zimbabwe appears to be satisfied with this confirmation in principle, and ongoing discussions are now focused on arriving at a detailed and mutually acceptable agreement on the shareholder structure, valuation and funding of the proposed share transactions. Further announcements will follow as progress is made.
Mine Closures
As disclosed at the time, the Marikana and Everest mines were placed on care and maintenance with immediate effect, pending a sustained improvement in Rand PGM prices. Please see extensive separate disclosures in this regard.
Change to Owner Operator
As disclosed shortly after the year end, AQPSA and its mining contractor, M&RC, mutually agreed to terminate their contract mining arrangements. AQPSA will become the Owner Operator of the Kroondal Mine following a handover period which will conclude at the end of 2012. The transition to Owner Operator will be facilitated by, specialised consulting firm Partners in Performance. The Owner Operator model will be rolled out at AQPSA's other mines as they are brought back into production. Please see the Operational Update released on 4 July 2012 for more detail in this regard.
Appointments
Jean Nel was appointed as an executive director of Aquarius in the second half of the year. Mr. Nel joined Aquarius in 2011 and was appointed to the board of its South African operating subsidiary, AQPSA, as Commercial Director in January 2012. Mr. Nel has been active in the Southern African mining and resources sector since 1999. Mr. Nel qualified as a CA (SA), obtained the CFA (AIMR) qualification and also completed the Advanced Management Programme at Insead.
Robert Schroder was been appointed as Managing Director of AQPSA shortly after the year end. Rob was previously Director: Projects for AQPSA, and prior to that he was MD of Shaft Sinkers (Pty) Ltd. As a result of the mine closures and as part of the process of moving to Owner Operator, several other management changes have become necessary. These are in the process of being finalised.
More information on all the corporate matters can be found at www.aquariusplatinum.com
[See www.aquariusplatinum.com for statistical information]
Aquarius Platinum LimitedIncorporated in BermudaExempt company number 26290Board of DirectorsNicholas Sibley Non-executive Chairman Stuart Murray Chief Executive Officer Jean Nel Executive: Commercial David Dix Non-executive Tim Freshwater Non-executive Edward Haslam Non-executive
Sir William Purves Non-executive (Senior Independent Director)
Kofi Morna Non-executive Zwelakhe Mankazana Non-executive Audit/Risk CommitteeSir William Purves (Chairman)David DixEdward HaslamKofi MornaNicholas Sibley
Remuneration/Succession Planning Committee
Edward Haslam (Chairman)David DixZwelakhe MankazanaNicholas SibleyNomination Committee
The full Board comprises the Nomination Committee
Company SecretaryWilli BoehmAQP Management
Jean Nel Executive: Commercial
AQPSA Management
Stuart Murray Executive Chairman Robert Schroder Managing Director Jean Nel Director: Commercial
Graham Ferreira Director: Finance & Company Secretary
Wessel Phumo General Manager: Kroondal Mimosa Mine ManagementWinston Chitando Managing Director Herbert Mashanyare Technical Director Peter Chimboza Resident Director Fungai Makoni General Manager Finance & Company Secretary
Platinum Mile Management
Richard Atkinson Managing Director
Paul Swart Financial Director Issued Capital
At 30 June 2012, the Company had in issue: 470,312,578 fully paid common shares and 120,000 unlisted options.
Substantial Shareholders 30 June 2012 Number of Shares Percentage
Savannah Resources Limited 34,004,767 7.23 State Street Nominees Limited (OM02) 33,355,185 7.09 JP Morgan Nominees Australia Limited 31,079,384 6.61 National Nominees Limited 26,611,322 5.66 Case Nominees Limited 26,444,397 5.62 Main Listing: Australian Securities Exchange Trading Information (AQP.AX) Secondary London Stock Exchange (AQP.L) ISIN number BMG0440M1284 Listing: Secondary JSE Limited (AQP.ZA) ADR ISIN number US03840M2089 Listing: Convertible Bond ISIN number XS0470482067 Broker (LSE) (Joint) Broker (ASX) Sponsor (JSE) Liberum Capital Limited City Point, 1 Ropemaker Street, London, EC2Y 9HT Euroz Securities Rand Merchant Bank Telephone: +44 (0) 20 3100 Level 18 Alluvion (A division of FirstRand 2000 58 Mounts Bay Bank Limited) Road, 1 Merchant Place Bank of America Merrill Perth WA 6000 Cnr of Rivonia Rd and Lynch Telephone: +61 Fredman Drive, Sandton 2146 2 King Edward St (0) 8 9488 1400 Johannesburg South Africa London, EC1A 1HQ Telephone: +44 (0)20 7628 1000
Aquarius Platinum (South Africa) (Proprietary) Ltd
100% Owned(Incorporated in the Republic of South Africa)
Registration Number 2000/000341/07
Unit 16, Berkley Office Park, 8 Bauhinia Street, Highveld Techno Park, Centurion, Pretoria, South Africa Postal Address: PO Box 76575, Wendywood, 2144, South Africa
Telephone: +27 (0)120012001Facsimile: +27 (0)120012070
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,AustraliaPostal Address: PO Box 485, South Perth, WA 6151, AustraliaTelephone: +61 (0)8 9367 5211Facsimile: +61 (0)8 9367 5233Email: info@aquariusplatinum.com
For further information please visit www.aquariusplatinum.com or contact:
Willi Boehm+61 (0) 8 9367 5211GlossaryA$ Australian Dollar Aquarius Aquarius Platinum Limited or AQP APS Aquarius Platinum Corporate Services Pty Ltd AQPSA Aquarius Platinum (South Africa) (Pty) Ltd ACS(SA) Aquarius Platinum (SA) Corporate Services (Pty) Ltd BEE Black Economic Empowerment BRPM Blue Ridge Platinum Mine CTRP Chrome 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 frequency 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 formerly South African Government Department of Minerals and Energy DMR South African Government Department of Mineral Resources, formerly the DME Dollar United States Dollar or $ 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 Reserves code JSE JSE Limited 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 nm Not measured PGE(s) Platinum group elements plus gold. Five metallic elements commonly (6E) 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 PlatMile Platinum Mile Resources (Pty) Ltd 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 Ridge Ridge Mining Limited 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. Tonne 1 Metric tonne (1,000kg)
UG2 Reef A PGE-bearing chromite layer within the Critical Zone of the Bushveld
Complex
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