1 Jun 2011 07:01
Aquarius Platinum Limited(Incorporated in Bermuda)Registration Number: EC26290Share Code JSE: AQPISIN Code: BMG0440M12841 June 2011
UPDATE ON SOUTH AFRICAN ASSETS
Aquarius Platinum Limited ("Aquarius" or the "Company") today announces that:
1. Its wholly-owned subsidiary Aquarius Platinum (South Africa) (Proprietary) Limited ("AQPSA") has completed an initial assessment of the costs and benefits of the expansion potential at the Everest Mine ("Everest") resulting from the recently announced acquisition of Booysendal South; and
2. Its wholly-owned subsidiary Ridge Mining (Proprietary) Limited ("Ridge Mining") has suspended the funding of the jointly-owned Blue Ridge Platinum Mine ("Blue Ridge") following a review of its economic viability in the current low platinum group metals ("PGMs") Rand price environment, pending a decision by the Board of Blue Ridge to place the mine on care and maintenance; and
3. AQPSA has agreed to purchase a 41.7% interest in Platinum Mile Resources (Proprietary) Limited ("PlatMile") from a combination of Mvelaphanda Holdings Limited ("Mvela") and PlatMile management for R 115.5 million (c.US$17 million), subject to certain conditions precedent, bringing the Aquarius group's holding in Platmile to 91.7%.
Everest and Booysendal South
On 4 May 2011, Aquarius announced its acquisition of Booysendal South, a PGM bearing property that is adjacent to and down-dip of Everest. The Company has now completed its initial assessment of the likely capital cost of including Booysendal South in the Everest mine plan, thereby expanding output at and extending the life of Everest. These preliminary estimates suggest that it will cost the Company approximately R850 million (c.US$120 million) to extend the mine life of Everest from the current 6 years to over 30 years, while at the same time increasing production levels to make use of both current excess and potential expansion capacity at the Everest processing plant.
This capital will be spent primarily on a second decline shaft system, mining and underground infrastructure, plant debottlenecking and a new tailings dam to cater for the extended life of mine. These capital expenditure estimates will be confirmed in due course by further technical study. The Everest expansion would be brownfield in nature, with commensurately lower project execution and ramp-up risk, and will enable Everest to increase its presently planned steady state production of around 190,000 PGM ounces per annum by approximately 25% to produce approximately 250,000 PGM ounces per annum from 2017 for the extended life of the mine.
Blue Ridge
As previously disclosed, Blue Ridge has been closed for redevelopment since August 2010. During the course of the execution of the redevelopment project, Ridge Mining determined that the mine could not be operated economically at current low Rand PGM prices and has therefore recommended that it be placed on care and maintenance pending a full review of its economic viability. The Company stated in its Q3 2011 report that such a review was likely to be prompted by the persistent low Rand price environment.
The Rand basket price for PGMs has since deteriorated further and on-mine cost inflation in South Africa has continued unabated, with further increases in the price of electricity, diesel and wages to be absorbed as the mine planned to re-open. As a result, at current Rand prices the mine would generate insufficient margins to justify further development expenditures. Ridge Mining accordingly suspended the funding of the Blue Ridge mine pending a final decision by the Board of Blue Ridge to place the mine on care and maintenance. It is envisaged that Blue Ridge management will then conduct a comprehensive evaluation of the mine to explore alternative mine plans and determine whether the Blue Ridge ore body can be efficiently exploited in a low Rand price environment.
The mining contractor at Blue Ridge, Murray & Roberts Cementation, has initiated the processes with the relevant labour unions required by the South African Labour Relations Act to enable Blue Ridge to make such redundancies as may be necessary to place the mine on care and maintenance. Blue Ridge has also initiated discussions around an asset-level debt restructuring with the Industrial Development Corporation and the Development Bank of Southern Africa, the mine's lenders, which are collectively owed approximately R370 million in interest bearing debt by Blue Ridge which is ring-fenced in the Ridge Mining group.
Platinum Mile Resources
PlatMile is a tailings retreatment operation located in the vicinity of AQPSA's Kroondal Mine that reprocesses tailings materials from the Rustenburg section of Rustenburg Platinum Mines. Aquarius has held 50% of this operation since 2008, during which time it has been a consistent source of profitable low cost PGM ounces, despite lower throughput at PlatMile than anticipated at the time of the original purchase.
Given the Aquarius group's shareholding in PlatMile, AQPSA has intimate knowledge of its operations, value proposition and potential to expand. The purchase price of R115.5 million was based on PlatMile's expected future profitability at current Rand PGM prices before any expansion initiatives, and is expected to be value accretive for Aquarius while enabling AQPSA to initiate development of a dedicated tailings division. In this regard AQPSA and PlatMile are currently assessing a number of growth opportunities. The purchase price is payable in cash or Aquarius shares at the election of Aquarius. After the transaction PlatMile management will continue to hold the 8.3% of PlatMile not owned by Aquarius.
The closing of this transaction is subject to several conditions precedent, including the approval of the South African Competition Commission and the final approval of the Boards of both Aquarius and Mvela.
Commenting on these developments, Stuart Murray, CEO of Aquarius, said:
"It is pleasing to note that the significant benefits of the Booysendal South acquisition are becoming increasingly apparent, with preliminary indications that Everest can be extended and expanded with industry-leading capital efficiency. As a result the Board has resolved to accelerate the feasibility studies and development in respect of the Booysendal project.
The decision by Ridge to suspend the funding of Blue Ridge was not an easy one to take, but it was based on the firm belief that it is in the interests of all stakeholders in the mine that it be placed on care and maintenance with immediate effect. The findings of Blue Ridge management during the redevelopment project coupled with the current economic realities of the platinum industry in South Africa strongly suggest that the mine would be loss-making from some time to come. Under the circumstances, any other course of action would be financially irresponsible for the wider Group.
On a more positive note, I am also very pleased that we have been able to consolidate our ownership of Platinum Mile. Although a small transaction, it is priced attractively and will pave the way to an expanded tailings retreatment arm for Aquarius which could become an important source of low cost PGM ounces in an environment of ever-increasing mining costs."
For further information please contact:
In the United KingdomGavin Mackay+44 7909 547 042In Australia: In South Africa: Willi Boehm Stuart Murray +61 8 9367 5211 +27 (0) 11 656 1140 Merchant bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
vendor