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AQP
AQP
AQP - Aquarius Platinum Limited - Financial results for the six months ended
31 December 2011
Aquarius Platinum Limited
(Incorporated in Bermuda)
Registration Number: EC26290
Share Code JSE: AQP
ISIN Code: BMG0440M1284
FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2011
Key Points: Financial
- Revenue decreased 25% to $252 million (H1 2011: $336 million)
- Mine operating net cash flow decreased by 53% to $25 million (H1 2011:
$54 million)
- Mine EBITDA decreased by 69% to $29 million (H1 2011: $93 million)
- Group cash balance at period end of $230 million
Key Points: Operational
- Group attributable production decreased by 14% to 215,453 PGM ounces (H1
2011: 250,972)
- The average US Dollar PGM Basket Price was stable compared to the
previous corresponding period despite US Dollar PGM prices weakening
over the half year due to deteriorating macroeconomic conditions
- The average Rand Basket Price increased by 5%
- The Rand weakened by 7% on average against the US Dollar
- Production at all South African mines negatively affected by industry-
wide increase in `Section 54` safety stoppages
- Production at Kroondal and Marikana further impeded by implementation
issues related to the new support regime
- Everest production suffered due to industrial relations problems and
ongoing poor ground conditions on the eastern side of the mine
- Weighted average on-mine unit cash costs in South Africa rose by 38% in
Rand terms, largely due to lower production
- Mimosa performed strongly again, continuing to produce at capacity
- Operations at Blue Ridge remained suspended for the entire six month
period
Key Points: Strategic
- Section 102 application submitted to the regulator in regard to the
purchase of the Everest extension property
- Conversion to a `Premium Listing` on the London Stock Exchange completed
during the period
- Everest Mine under review - to be optimised to produce at 10,000 PGM oz
per month for the next 12-18 months
- Contractor arrangements and model under review
Commenting on the results, Stuart Murray, CEO of Aquarius Platinum said:
"Our financial results for the six months to December 2011 do no more than
reflect the ongoing difficult operating and trading conditions facing the
Company and the southern African platinum industry. They should come as no
surprise to shareholders and observers of this space. In this environment I
am pleased to report that the Group generated modest positive cash flow at
the operating level, although the business in South Africa is not generating
sufficient cashflow to cover replacement capital. Acquisitions and growth
capex had to be funded from cash resources. It must also be remembered that
the reported net loss and resulting negative EPS figure are rather
exaggerated by a substantial non-cash foreign exchange loss generated by the
revaluation of inter-company loans as a result of volatile exchange rate
conditions. Following the capitalisation of the inter-company loans, much of
this exchange rate induced volatility impact on earnings should reduce going
forward.
As I mentioned in our recent quarterly production report, from an operational
perspective the period under review has been a most challenging one. Economic
and government-imposed pressures continue to mount against the platinum
industry in the region. By the end of the period many of the problems
relating to the implementation of the new hangingwall support methodology at
Kroondal and Marikana were resolved but ongoing below budget production
performance, poor grade control, and poor cost control culminated in
significant unit cost escalations at Kroondal, Marikana and Everest. This has
lead AQPSA to commence with a thorough review of the current contractual
arrangements with its primary mining contractor, Murray & Roberts
Cementation. The current cost reimbursable contractual arrangement has become
untenable to AQPSA and is expected to be changed or be replaced by the end of
the third quarter.
Regulatory risks have also markedly escalated. In South Africa, the
widespread Section 54 safety stoppages and permitting delays are affecting
AQPSA, while in Zimbabwe increased royalties and mineral lease / ground rent
charges are damaging Mimosa. In addition the indigenisation process remains
ongoing and its outcome uncertain. Our management continues to engage the
appropriate departments of the governments of both jurisdictions in order to
mitigate these impacts and safeguard our business as best we can. The poor
economic outlook remains beyond our control, and looking at the fall in PGM
prices from October through December made me think of a mini-GFC at play. At
our results for the comparative period ended December 2010 I said we were
through the worst and thought the bottom was behind us in this sector. I
could not have been more wrong. However until we reach a turning point, we
remain committed to the constant re-evaluation and optimisation of all
aspects of our business and operations in the current low margin environment
with a focus on cash preservation."
Aquarius Group attributable production (PGM ounces) - six month periods to
31 December 2011
Please refer to www.aquariusplatinum.com for graph
Production
Total production from all Aquarius operations for the six months to December
2011 was 384,731 PGM ounces, representing a 16% decrease compared to the
period ended December 2010 (the previous corresponding period or "pcp").
Production attributable to Aquarius fell by 14% to 215,453 PGM ounces for the
period under review when compared to the pcp and by 9% compared to the six
months ended June 2011, due to temporary operational issues encountered as a
result of the implementation of new underground hangingwall safety support
systems as well as a significant increase in the application of so-called
"section 54" safety stoppages imposed by the regulator in South Africa,
currently an industry-wide issue.
Production by Mine and Attributable to Aquarius
PGMs (4E) Mine Attributable to Aquarius
Half Year ended Half Year Half Year Half Year
Dec 2011 ended ended ended
Dec 2010 Dec 2011 Dec 2010
Kroondal 175,704 230,019 87,852 115,010
Marikana 54,802 60,587 27,400 30,294
Everest 41,787 45,561 41,787 45,561
Mimosa 104,254 101,156 52,127 50,578
CTRP 1,769 2,921 885 1,461
Platinum Mile 6,415 8,044 5,402 4,022
Blue Ridge - 8,092 - 4,046
Total 384,731 456,380 215,453 250,972
The chart below illustrates the impact on production of each of the
operations. The most significant negative factor was lower production at
Kroondal, as a result of both section 54 stoppages and long lead times for
the mechanised equipment necessary to install the new safety systems
underground. This necessitated manual installation of these systems which
slowed the mining cycle considerably in the first half of the 2012 financial
year. Marikana encountered similar challenges. Both of these mines had
largely overcome the issues relating to the support systems by December 2012.
The
ramp-up at Everest was interrupted by a two-week strike, ongoing industrial
relations issues owing to the emergence of a new union (AMCU), poor ground
conditions and section 54 stoppages, and the Blue Ridge mine remained closed
for the entire period due to adverse economic conditions. These factors
resulted in substantially lower production compared to the first half of the
2011 financial year, despite another strong performance from Mimosa and
additional attributable ounces resulting from the purchase of a greater stake
in Platinum Mile. Given the significant challenges that continue to face the
Company and
the platinum industry in the short term, Aquarius intends to retain
operational flexibility and will actively manage its near-term production
profile by optimising its producing assets to match the prevailing market
conditions. Production in the second half of the financial year is expected
to increase marginally, prompting management to revise production guidance
downwards for
the full 2012 financial year, to approximately 440,000 PGM ounces.
Please refer to www.aquariusplatinum.com for graph
Foreign Exchange
The Rand weakened significantly over the 6 months to December 2011, moving
from an average of R7.12 to the US Dollar in the period to December 2010 to
an average of 7.62 over the current period, driven largely by the sovereign
debt crisis in Europe and the associated depreciation of the Euro against the
US Dollar, as the Euro Zone remains South Africa`s largest trading partner.
The Rand closed the period under review at R8.12 to the US Dollar.
Rand Dollar Exchange Rate
Please refer to www.aquariusplatinum.com for graph
Platinum Group Metal Prices
Fundamental demand for PGMs to some extent decoupled from the increasingly
poor macroeconomic outlook during the first quarter of the 2012 financial
year, as automotive and other industrial users continued to be net buyers of
the metals and emerging market investment demand offset physically-backed ETF
outflows. This delicate balance was disrupted during the second quarter,
however, as macroeconomic concerns coupled with the general PGM oversupply
situation began to negatively affect industrial demand. The US Dollar
platinum price fell to below that of gold, and has remained there during the
period under review, for the first time in decades, an important
psychological event which firmly defined PGMs as industrial commodities
rather than counter-cyclical "stores of value". Platinum jewellery demand did
remain robust, however, in the face of high prices for its primary
substitute, gold, and falling platinum prices. Average US Dollar PGM prices
in the period under review nonetheless remained static year-on-year, but
decreased materially compared to the second half of the 2011 financial year.
The PGMs declined almost in step with each other during the first six months
of the 2012 financial year. Platinum closed the period 21% lower at $1,354
per ounce while palladium fell 16% to $630 per ounce. Rhodium was the weakest
performer, declining by 30% to close the period at $1,400 per ounce. Gold was
6% higher at $1,572 per ounce.
Individual PGM Prices December 2010 - 2011
PGM Basket Prices December 2010 - 2011
(US Dollar per PGM ounce) (US Dollar and Rand per PGM
ounce)
Please refer to www.aquariusplatinum.com for graph
The Rand depreciation provided some relief to the South African platinum
industry in the period under review, displaying its usual inverse correlation
to the US Dollar PGM prices. The average Rand basket price for the period
rose by 5%, despite flat average US Dollar metals prices. The average
achieved production-weighted US Dollar basket price across all operations for
the six months ended December 2011 was flat at $1,364 per PGM ounce, while
that for the South African operations was $1,373 (equivalent to R10,369 per
PGM ounce). Weaker US Dollar PGM prices outweighed gains in the Rand basket
price by the end of the period, which closed at R9,403 per PGM ounce. In
Zimbabwe, the achieved basket price for the first half of the financial year
was $1,338 per ounce.
Financial results: Half Year to 31 December 2011
Aquarius` consolidated result for the half-year ended 31 December 2011 was a
loss of $113 million (24.31 cents per share). The result includes a foreign
exchange loss (forex) of $91 million arising substantially from the
revaluation of intercompany loans within the group.
Profitability at mine level (on-mine EBITDA) was $29 million compared to $93
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 $25 million sales adjustment to be incurred.
Group attributable mine production for the half-year was 215,453 PGM ounces.
This was 35,519 PGM ounces (14%) lower compared to the pcp.
Revenue (PGM sales and interest) for the half-year to December 2011 was $252
million, 25% lower compared to the pcp due to lower production and lower PGM
metal prices. The revenue received per PGM ounce for the half-year was
$1,171, down 14% from the pcp.
Group Financials by Operation
Kroonda Marikan EverestMimosa Plat CTRP Blue Total
l a Mile Ridge
PGM ounces 87,852 27,400 41,78 52,127 5,402 885 -
215,453
(4E) 7
(attributa
ble)
Kroonda Marikan Evere Mimosa Plat CTRP Blue Corpo Total
l a $m st $m $m Mile $m $m Ridge rate $m
$m $m $m
Revenue 94.1 30.0 47.5 72.8 4.4 0.6 - 2.9 252.4
Cost of (98.5) (35.4) (57.1 (38.4) (3.7) (1.9) (1.5) -
(236.6)
sales - )
mining,
processing
&
Admin
Cost of (11.7) (10.6) (6.3) (4.8) (2.3) (0.1) (0.5) - (36.4)
sales -
depreciati
on &
Amortisati
on
Gross (16.1) (16.1) (15.9 29.6 (1.6) (1.5) (2.0) 2.9 (20.6)
profit/(lo )
ss)
Other - - - - - - - 1.1 1.1
income
Administra - - - - - - - (7.4) (7.4)
tive costs
Foreign 12.6 3.2 1.3 - - 0.1 - (108. (91.3)
exchange 5)
gain/(loss
)
Finance - - - - - - - (17.6 (17.6)
costs )
Profit/(lo (3.5) (12.8) (14.5 29.6 (1.6) (1.4) (2.0) (129.
(135.7)
ss) before ) 5)
income tax
Income tax - - - - - - - 22.2 22.2
benefit
Net (3.5) (12.8) (14.5 29.6 (1.6) (1.4) (2.0) (107.
(113.5)
profit/(lo ) 3)
ss) from
ordinary
activities
Group gross cash margin decreased to 6.2% from 36.5% due to a combination of
higher mining costs and lower PGM metal prices. Weighted average unit costs
in dollar terms rose 26% to $1,093 per PGM ounce and PGM basket prices
achieved (i.e. after smelter payability) decreased 14% to $1,171 per PGM
ounce.
Total cash cost of production was $237 million, up 26% per PGM ounce in
Dollar terms (and 35% 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 new underground hangingwall safety support systems as
well as a significant increase in the incidence of so-called "section 54"
safety stoppages. Amortisation and depreciation of $36 million was under
budget but in line with lower production for the half-year. Finance costs of
$18 million included $15 million on convertible notes and bank borrowings and
$3 million of non-cash interest arising from the unwinding of the net present
value of the rehabilitation provisions of AQPSA.
During the half-year Aquarius recorded net foreign exchange losses of $91
million. These losses were incurred substantially "within" the group through
exchange movements on intercompany loans. In September 2011, Aquarius took
advantage of a stronger US dollar and capitalised $353 million of
intercompany loans. This significantly reduces future exchange rate
fluctuations on these loans from the income statement. The foreign exchange
loss on these loans recorded in this period`s income statement simply
reflects a reversal of previously booked forex gains. The loans are now
represented as capital in the subsidiaries and will no longer be subject to
monthly revaluation through the income statement. No cash left the group as
a result of these adjustments.
Income tax expense was lower and comprised $10.1 million of Zimbabwean tax of
which $3 million was deferred tax, a $32.9 million deferred tax credit in
South Africa and $0.6 million of MPRDA royalty paid in South Africa.
Consolidated cash balances at period end were $230 million. Net cash of $25
million was generated by operations during the half-year. During the period
the group paid $42 million to fund its capital expenditure program, paid $12
million to acquire a further 41.7% equity interest in Platinum Mile Resources
(Pty) Ltd, paid a deposit of $15 million towards the acquisition of the
Everest extension mineral rights and paid $19 million in dividends to
Aquarius shareholders.
Financials
Aquarius Platinum Limited
Consolidated Income Statement
For the Half Year ended 31 December 2011
$`000
Half Year Ended Year Ended
Note 31/12/11 31/12/10 30/6/10
Attributable Production 215,457 * 246,926 * 478,551*
(PGM Ounces)
(* before Blue Ridge
production)
Revenue (i) 252,381 336,152 682,859
Cost of sales (including (ii) (272,952) (241,327) (507,728)
D&A)
Gross (loss)/profit (20,571) 94,825 175,131
Other income 1,108 288 1,764
Administrative costs (iii) (7,394) (8,105) (13,030)
Foreign exchange (iv) (91,289) 66,202 60,068
(loss)/gain
Finance costs (v) (17,583) (15,369) (30,945)
Settlement of contractor - (7,810) (7,810)
dispute
Impairment losses - - (159,779)
(Loss)/profit before income (135,729) 130,031 25,399
tax
Income tax (vi) 22,237 (35,751) (35,795)
benefit/(expense)
Net (loss)/profit for the
period (113,492) 94,280 (10,396)
Non-controlling interests 1 - -
(Loss)/profit attributable
to equity holders of (113,493) 94,280 (10,396)
Aquarius Platinum Limited
Earnings per share (basic - (24.31) 20.43 (2.25)
cents)
Notes on the Consolidated Income Statement
(i) Revenue has decreased as a result of lower production and a 13%
decrease in the US Dollar PGM basket price achieved.
(ii) The 29% increase in cost of sales on a unit cost basis reflects the
continued ramp-up of Everest, temporary operational issues
encountered as a result of the implementation of new underground
hangingwall safety support systems, and the impact of inflation on
mine cash costs. It includes depreciation and amortisation of $36
million.
(ii) Relates to administration costs of the Aquarius Group inclusive of
costs associated with business development activities, legal and
financial advisory expenses.
(iv) Net foreign exchange (FX) loss reflects losses on group loans and
cash due to the strengthening of the Dollar against other
currencies and FX gains on sales adjustments.
(v) Finance costs include a $15 million interest expense on convertible
bonds and $3 million in non-cash interest arising from the
unwinding of the net present value of the rehabilitation provision
of AQPSA.
(vi) Income tax credit includes a $30 million deferred tax credit offset
by $5 million normal tax, $2 million withholding tax and $1 million
MPRDA royalty.
Aquarius Platinum Limited
Consolidated Cash Flow Statement
Half year ended 31 December 2011
$`000
Half year ended Year ended
Note: 31/12/11 31/12/10 30/06/11
Net operating cash (i) 24,948 47,061 162,311
inflow
Net investing cash (ii) (69,221) (59,388) (209,908)
outflow
Net financing cash (iii) (34,350) (25,816) (33,527)
outflow
Net decrease in cash (78,623) (38,143) (81,124)
held
Opening cash balance 328,083 381,734 381,734
Exchange rate movement (iv) (19,333) 24,868 27,473
on cash
Closing cash balance 230,127 368,459 328,083
Notes on the Consolidated Cash Flow Statement
(i) Net operating cash flow includes a $306 million net inflow from
sales, $279 million paid to suppliers, interest income of $4
million and income tax paid of $7 million.
(ii) Reflects development and plant and equipment expenditure incurred
supporting the group`s capital expenditure program - $42 million,
acquisition of 41.7% of Platmile - $12 million and $15 million
deposit towards the Everest extension (Booysendal)
(iii) Includes $19 million in dividends paid to shareholders, $9 million
interest paid and a $3 million purchase of shares reserved for
share plan.
(iv) Reflects movement of other currencies against the Dollar.
Aquarius Platinum Limited
Consolidated Balance Sheet
At 31 December 2011
$`000
Half year ended Year ended
Note 31/12/11 31/12/10 30/06/11
Assets
Cash assets 230,127 368,459 328,083
Current receivables (i) 92,857 123,937 108,395
Other current assets (ii) 47,452 54,005 44,747
Property, plant and equipment (iii) 273,635 320,789 325,763
Mining assets (iv) 434,883 507,095 480,634
Other non-current assets (v) 87,759 98,860 91,735
Intangibles (vi) 90,560 82,767 77,989
Total assets 1,257,273 1,555,912 1,457,346
Liabilities
Current liabilities (vii) 105,634 109,553 120,549
Non-current payables (viii) 5,368 5,383 6,150
Non-current interest-bearing (ix) 259,408 246,027 257,599
liabilities
Other non-current liabilities (x) 177,836 249,221 221,711
Total liabilities 548,246 610,184 606,009
Net assets 709,027 945,728 851,337
Equity
Issued capital 23,516 23,162 23,509
Treasury shares (18,169) (15,076) (16,190)
Reserves 712,797 697,789 727,372
Retained earnings (15,461) 239,853 116,646
Total equity attributable to
equity holders 702,683 945,728 851,337
of Aquarius Platinum Limited
Non-controlling interests (xi) 6,344 - -
Total equity 709,027 945,728 851,337
Notes on the Consolidated Balance Sheet
(i) Reflects debtors receivable on PGM concentrate sales.
(ii) Reflects PGM concentrate inventory, reef stockpiles and consumables
stores.
(iii) Represents plant and equipment within the Group.
(iv) Mining assets relate to Kroondal, Marikana, Everest and Mimosa mine
properties and mine development.
(v) Includes the recoverable portion of rehabilitation provision from
Anglo Platinum of $12 million, a receivable from the Reserve Bank
of Zimbabwe (RBZ) of $28 million, a receivable from outside
shareholders of Blue Ridge and Sheba`s Ridge of $27 million,
investments in rehabilitation trusts of $17 million and investments
held for resale of $3 million.
(vi) Includes intangibles relating to contract value acquired on
acquisition of equity interest in Platinum Mile Resources (Pty)
Ltd.
(vii) Includes creditors and other payables of $73 million, DBSA and IDC
loans at Blue Ridge of $26 million, AQPSA equipment leases of $6
million and provisions of $1 million.
(viii) Includes rehabilitation obligations on P&SA1 and P&SA2 structures.
(ix) Includes convertible notes of $251 million and AQPSA equipment
leases of $8 million.
(x) Includes deferred tax liabilities of $116 million and provision for
closure costs of $62 million.
(xi) Minority interests reflects 8.3% outside equity interest of
Platmile Resources (Pty) Ltd, now consolidated following Aquarius`
increase in equity to 91.7% during the half year.
Operating Review Summary (all numbers on 100% basis)
...
This section contains summarised operating reviews of each of the Company`s
operations. Full operating statistics are provided on page 18 of this report,
and other updates relevant to all operations can be found under Corporate
Matters on page 17. In addition, further detail on each of the operations can
be obtained from the quarterly and full-year 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 (Aquarius Platinum - 100%)
P&SA 1 at Kroondal (Aquarius Platinum - 50%)
- 12-month rolling average DIIR deteriorated slightly to 0.78 per 200,000
man hours
- Production decreased by 12% to 2,964,000 tonnes
- Head grade decreased from 2.62 g/t to 2.38 g/t
- Recoveries deteriorated slightly to78%
- Volumes processed decreased by 13% to 2,950,000 tonnes
- Stockpiles at the end of the period totalled approximately 28,000 tonnes
- PGM production decreased by 24% to 175,704 PGM ounces
- Revenue decreased by 32% to R1,409 million due to lower production
- Mining cash costs increased by 29% to R504 per tonne, and costs per PGM
ounce by 47% to R8,459
- Kroondal`s cash margin for the period decreased from 36% to -6%
- Contractor arrangements and model under review
Commentary
Safety, Health and Environment
Regrettably, one fatality occurred at Kroondal during the period. Mr Hennie
Otto was fatally injured in a lifting and equipment handling incident at the
Kroondal processing plant in October 2011. Prior to this, Kroondal had just
recorded two million fatality-free shifts.
Operations
Mine production continued to be negatively impacted by the implementation of
the new hangingwall support systems, as manual drilling of support holes
remained necessary during much of the first half. Slower-than-plan
installation of support thus continued to interfere with the blasting cycle,
thereby temporarily reducing mining capacity. To mitigate this issue, and
because of an international shortage of the required drill steel for the new
support systems, certain areas of the mine have been moved back to the old
national standard of roof support in the short term. While this situation is
not optimal, it has enabled those mining areas to begin producing at capacity
once again. The new technologies for the early detection of geological
anomalies (ground penetrating radar, snake-eye cameras and the other elements
of the revised TARP system) remain in place in all mining areas.
In addition to this, delivery has now been taken of four mechanised support
drill rigs, and all cable anchors for hangingwall support will now be drilled
on a mechanised basis. Further rigs are on order and their rollout will occur
as their lead times permit. These measures resulted in an increase of
approximately 18% in daily production, permitting a return to production at
capacity by the end of the period under review. However, an elevated
incidence of Section 54 safety stoppages issued in the Rustenburg district
has also negatively affected production. A dialogue has been established with
the new Principal Inspector of the region in an attempt to find a practical
solution to this issue.
Continued below budget production performance, poor grade control and cost
inflation culminating in significant unit cost escalations at Kroondal,
Marikana and Everest have lead AQPSA to review the current contractual
arrangements with AQPSA`s primary mining contractor, Murray & Roberts
Cementation ("MRC"). The current contractual arrangement has become untenable
to AQPSA and following the completion of the review will change.
The change in mining orientation also continued to require the establishment
of additional face at the expense of head grade. Primary development
decreased by 16% over the period to a total of 5,898 metres.
Rustenburg Platinum Mines` (RPM) Siphumelele 3 ore reserves have now been
included in both P&SA1 and P&SA2 and mining there has commenced, in
accordance with an agreement between RPM and AQPSA (see "Corporate Matters"
below).
P&SA2 at Marikana (Aquarius Platinum - 50%)
- 12-month rolling average DIIR improved to 0.33 per 200,000 man hours
from 0.61 in the previous period
- Production decreased by 11% to 1,005,000 tonnes, all from underground
operations
- Head grade decreased by 3% to 2.32 g/t
- Recoveries increased by 6% to 74%
- Volumes processed decreased by 13% to 991,000 tonnes
- PGM production decreased by 10% to 54,802 ounces
- Revenue decreased by 20% to R451 million due to lower production
- Mining cash costs increased by 26% to R542 per tonne, and costs per PGM
ounce by 22% to R9,800
- Marikana`s cash margin deteriorated from 13% to -19%
- Contractor arrangements and model under review
Commentary
Safety, Health and Environment
No fatalities occurred at Marikana during the period under review, and the
DIIR at the mine improved materially. Following the tragic accident in July
2010, Marikana has recorded over a year without a fatal accident, and the
operations achieved one million fatality-free shifts on 9 January 2012.The
Marikana processing plant has recorded 3 million fatality free shifts, and no
lost time injuries have occurred there for the past 8 years.
Operations
Marikana experienced the same challenges relating to the new hangingwall
support system implementation as did Kroondal, and the same measures were
taken to counteract these temporary capacity reductions. Also in common with
Kroondal and most of the mines in the Rustenburg area, Marikana was afflicted
by a series of section 54 stoppages during the period under review.
Primary development decreased by 41% over the period to a total of 3,440
metres.Marikana`s4 Shaft is now running at capacity, while both the M5
project and the Siphumelele shaft are increasing production in line with
their development schedules. The latter two shafts remain in ramp-up phase,
and as a result at current Rand basket prices they are loss-making.
Everest Mine (Aquarius Platinum - 100%)
- 12 month rolling DIIR deteriorated significantly to 1.71 per 200,000 man
hours from 0.25
- Production increased by 6% to 641,000tonnes
- Head grade deteriorated from 2.78 g/t to 2.42 g/t
- Recoveries improved by 6% to 84%
- Volumes processed decreased/increased by 0.13% to 642,000 tonnes
- PGM production decreased by 8% to 41,787 PGM ounces
- Revenue decreased by 23% to R353 million
- Mining cash costs increased by 20% to R641 per tonne, and costs per PGM
ounce by 31% to R10,311
- Everest`s cash margin decreased from 21% to -22%
- Contractor arrangements and model under review
Commentary
Safety, Health and Environment
Regrettably, two fatalities occurred at Everest during the period. Christo
Venter was killed in an underground vehicle accident, and David Sedulela died
in a fall of ground incident. The DIIR also deteriorated significantly. This
is unacceptable and priority initiatives are underway to remedy this.
Operations
Mining during the first quarter of the 2012 financial year was negatively
impacted by the loss of 36 shifts as a result of both section 54 stoppages, a
belt fire and maintenance issues with the underground vehicle fleet which
resulted in lower LHD and drill rig availability. These incidents resulted in
production significantly below plan.
In the second quarter, industrial action occurred at Everest as a result of
the refusal by the mining contractor at the mine to recognise the AMCU trade
union. This strike cost Everest 13 production days, equivalent to
approximately 9% of H1 production. AMCU has now been recognised in a new
structure, and employees at Everest were transferred to this new structure.
Wage negotiations with AMCU were only finalised in late January 2012.
As disclosed in the most recent quarterly production report, Aquarius has
embarked on a strategic review of the Everest operation, prompted by several
factors. These include an extended oxidised zone in the shallower extremities
of the western side of the orebody with the associated poor ground conditions
and grade reductions, and an inability to mitigate this due to the failure by
the DMR to grant the Hoogland open pit mining authorisation, together with
ongoing underperformance by the mining contractor and continued industrial
relations difficulties. In the interim, given these operational challenges
and the currently prevailing low Rand PGM prices, and until the Section 102
consent relating to the Everest extension property has been granted, it has
been decided to optimise Everest at a sustainable underground production
target of 10,000 4E ounces per month for the next 12 to 18 months.
Operating Cash Costs
Production during the period was significantly below capacity at all South
African mining operations. This had a negative effect on unit costs due to
the high fixed cost base.
AQPSA Operating costs per ounce (R)
4E 6E 6E net of by-
products
(Pt+Pd+Rh+Au) (Pt+Pd+Rh+Ir+Ru+Au) (Ni&Cu)
Kroondal 8,459 6,931 6,802
Marikana 9,800 8,084 7,847
Everest 10,311 8,567 8,217
Capital expenditure
Ongoing capital expenditure remained at normal operating levels but project
capital remained higher than usual at Kroondal with the sinking operations at
K6 shaft, which is a replacement shaft scheduled for first production in June
2013, with reef intersection anticipated in June 2012.
The Mobile Equipment Capital is being financed through a lease agreement over
the life of the equipment.
Kroondal Marikana Everest
(R`000 unless Total Per 4E oz Total Per 4E oz Total Per 4E oz
otherwise
stated)
Ongoing 98,965 563 49,154 897 59,216 1417
Infrastructure
Establishment
Project Capital 90,706 516 250 5 2133 51
Mobile Equipment 46,825 266 35,906 655 1,356 32
Total 236,496 1,346 85,310 1,557 62,705 1,501
RIDGE MINING LIMITED (Aquarius Platinum - 50%)
Blue Ridge Platinum Mine
Commentary
Operations at BRPM, the 50% jointly owned mine, were suspended in the final
quarter of the 2011 financial year, and the mine remained on care and
maintenance throughout the period under review.
BRPM remains indebted to its three senior lenders being the Industrial
Development Corporation Limited, the Development Bank of Southern Africa and
Aquarius for circa R736 million of which R416 million is owed to the IDC and
DBSA and R320 million to Aquarius. Blue Ridge is in breach of its debt
covenants and remains in discussions with its three senior lenders on how to
best manage the mine and its indebtedness going forward.
The decision by the Board of Blue Ridge to place the mine on care and
maintenance in 2011 was prudent given the continued low prevailing Rand
basket prices.
MIMOSA INVESTMENTS (Aquarius Platinum - 50%)
Mimosa Platinum Mine
- 12-month rolling average DIIR was flat at 0.26 per 200,000 man hours
- Production decreased by 3% to 1,182,000 tonnes
- Head grade improved by 1% to 3.64 g/t
- Recoveries improved slightly to 78%
- Volumes processed decreased by 1% to 1,147,154 tonnes
- Stockpiles at the end of the period totalled approximately-182,017
tonnes
- PGM production increased by 3% to 104,254 PGM ounces
- Revenue increased by 1% to $146 million due to higher metal prices
achieved
- Mining cash costs increased by 22% to $67 per tonne, and costs per PGM
ounce by 18% to $736
- Stay-in-business capital expenditure was $315 per PGM ounce for the
period
- Mimosa`s cash margin for the period fell from 56% to 52%
Commentary
Safety, Health and Environment
No fatalities occurred at Mimosa during the period under review. The
Disabling Injury Incidence Rate remained low and stable.
Operations
Mimosa continued to operate at capacity during the period under review,
although some production disruption was caused in the latter months of the
half-year by power outages as well as surface electrical breakdowns. The
Zimbabwe Electricity Supply Authority (ZESA) imports electricity from Hydro
Cabhora Basa (HCB) of Mozambique to overcome the shortfall in its own
installed power generating capacity. HCB has threatened to cut off supply to
ZESA for non-payment, and discussions are currently ongoing between the local
power utility, HCB, Mimosa management and other platinum producers in order
to arrive at a solution to this situation.
The Zimbabwean political and regulatory environment becomes ever more
challenging for all mining companies operating in the country. The press
reports referred to in the most recent Aquarius quarterly production report
relating to a very material increase in ground rental, mining licensing and
mineral export licensing fees, among others, were confirmed in early February
by the publication of a Government Gazette to that effect. This will result
in an additional charge for Mimosa of approximately $6.8 million Dollars each
year.
Mimosa has now complied with the Reserve Bank of Zimbabwe`s recent directive
to localise its offshore foreign currency accounts in Zimbabwe. Mimosa will
work closely with its suppliers and bankers in order to ensure that this
development does not have a negative impact on operations.
As previously disclosed, royalties for gold and platinum have been further
increased by 100% to 7% and 10% of revenue respectively, as of 1 January
2012. The relevant authorities are being engaged with a view to taking a
holistic approach to the issue of royalties, taxes and other government
related payments such that a streamlined payment structure is put in place.
Stay-in-business capital expenditure rose because nearly half of the approved
capital budget for the 2012 financial year was spent in the first few months
of the financial year on production equipment with long lead times. Capital
was also spent during the period on a conveyor belt extension, the down-dip
development, ventilation walls underground and construction of staff housing.
Operating Cash Costs
The power issues encountered in the second quarter adversely affected
production performance to some degree, which had a resultant negative impact
on unit cash costs.
Operating cash costs per ounce
4E (Pt+Pd+Rh+Au) 6E(Pt+Pd+Rh+Ir+Ru+Au) 4E net of by-products
(Ni, Cu & Co)
Mimosa 736 698 366
Indigenisation and Economic Empowerment
As disclosed at the time, a deed of trust establishing the Zvishavane
Community Trust was signed during the quarter, to form an indivisible part of
the full indigenisation plan. Discussions with the Ministry of Indigenisation
will resume in January 2012 to get full acceptance of Mimosa`s indigenisation
proposal, and the official launch of the trust by the President of Zimbabwe
is now expected in early 2012.
TAILINGS OPERATIONS
Chromite Tailings Retreatment Plant (CTRP) (Aquarius Platinum - 50%)
- Material processed increased139% to 156,000tonnes
- Head grade was flat at 2.96 g/t
- Recoveries decreased by 75% to 12%
- Production decreased by 39% to 1,769 PGM ounces
- Cash costs increased by 128% to R13,087per PGM ounce
- Revenue was R9 million for the period
- CTRP`s cash margin for the period was-168%, down from 20% in the
previous period
Platinum Mile (Aquarius Platinum -91.70%) (consolidated - 100% attributable)
- Material processed increased by 10% to 2,539,000 tonnes
- Head grade decreased by 18% to 0.51 g/t
- Recoveries decreased by 6% to 16%
- Production decreased by 20% to 6,415 PGM ounces
- Cash costs increased by 23% to R7,019 per PGM ounce
- Revenue was R52 million for the period
- The cash margin for the period was 16%, down from 31% in the previous
period
Commentary
CTRP: Plant modifications and upgrades were completed in the second quarter.
Throughput and recoveries showed a steady increase in the final months of the
period under review. It is expected that the operation will again yield
positive margins and operate profitably from the third quarter of FY2012
onwards.
Platinum Mile: Volumes, grades and recoveries have remained fairly constant
year-on-year. Lower basket prices have impacted negatively on cash margins.
The operation is running profitably and a feasibility study to evaluate the
viability of pumping Kroondal tailings to be treated at the operation has
commenced. Platinum Mile is now consolidated in the Aquarius accounts, which
results in 100% of production being attributable and the generation of a
small minority interest in the group income statement.
Operating cash costs per ounce
4E (Pt+Pd+Rh+Au) 6E (Pt+Pd+Rh+Ir+Ru+Au) 4E net of by-products
(Ni, Cu& Co)
CTRP 13,087 12,058 10,141
Platinum 7,019 6,051 4,850
Mile
CORPORATE MATTERS
Agreement with Anglo American Platinum regarding Siphumele 3
AQPSA and Anglo American Platinum Limited ("Amplats") have entered into an
agreement in terms of which the Siphumelele 3 Shaft and its remaining UG2
resources has been moved from Amplats` Rustenburg operations to the existing
P&SA arrangements currently operating at the Kroondal and Marikana mines. The
Siphumelele 3 mining area will form part of the P&SA`s for four years from 1
July 2011 or until mined out, whichever is sooner. AQPSA has commenced mining
at the Siphumelele 3 mining area and the Siphumelele 3 shaft itself is
presently in ramp-up.
Wage settlement with the National Union of Mineworkers (NUM)
MRC successfully concluded a 2-year wage agreement with NUM in the first
quarter in terms of which employees at Aquarius` South African mines were
granted a headline wage increase, reduced working hours, an increased
contribution to their provident funds and an increased Living Out allowance.
The total increase in the cost to company is 8.17% in the first year and will
be 8.3% in the second. This settlement has been back-dated to 1 July 2011.
Convertible Bonds
On 29 September 2011 Aquarius repurchased two tranches of its outstanding
Convertible Bonds due December 2015. Each tranche had a face value of $1
million and was repurchased at $0.94 million. Aquarius does not have a buy
back policy but may repurchase bonds infrequently when the opportunity
presents itself.
Premium Listing on the London Stock Exchange
On 28 November, 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 will be eligible for inclusion in the JSE
equity indices.
Management changes at AQPSA
With effect from January 2012 Robert Schroder was appointed as an Executive
Director of AQPSA, responsible for capital and projects. Rob is a qualified
Quantity Surveyor, and prior to joining AQPSA Rob was Managing Director of
Shaft Sinkers (Pty) Limited, a leading mining contractor in South Africa.
Jean Nel, previously Commercial Manager of AQPSA, was also appointed to the
Board of AQPSA as Commercial Director.
More information on all corporate matters can be found at
www.aquariusplatinum.com
(Please refer to www.aquariusplatinum.com for the Statistical information)
Aquarius Platinum Limited
Incorporated in Bermuda
Exempt company number 26290
Board of Directors
Nicholas Sibley Non-executive Chairman
Stuart Murray Chief Executive Officer
David Dix Non-executive
Tim Freshwater Non-executive
Edward Haslam Non-executive
Sir William Purves Non-executive (Senior Independent Director)
Kofi Morna Non-executive
ZwelakheMankazana Non-executive
Audit/Risk Committee
Sir William Purves (Chairman)
David Dix
Edward Haslam
Kofi Morna
Nicholas Sibley
Remuneration/Succession Planning Committee
Edward Haslam (Chairman)
David Dix
Zwelakhe Mankazana
Nicholas Sibley
Nomination Committee
The full Board comprises the Nomination Committee
Company Secretary
Willi Boehm
AQP Management
Jean Nel Executive: Commercial
Gavin Mackay Executive: Business Development & Communications
AQPSA Management
Stuart Murray Executive Chairman
Anton Lubbe Managing Director
Helene Nolte Director: Finance
Mkhululi Duka Director: Human Resources & Transformation
Jean Nel Director: Commercial
Robert Schroder Director: Projects and Capital
Abraham van Ghent Senior General Manager: Operations (Acting as GM:
Kroondal)
Graham Ferreira General Manager: Group Admin & Company Secretary
Wessel Phumo General Manager: Marikana
Augustine Simbanegavi General Manager: Everest
Jan Hattingh General Manager: Engineering
Dave Starley General Manager: Projects
Mimosa Mine Management
Winston 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 31 December2011, the Company had in issue: 470,312,578 fully paid common
shares and 120,000 unlisted options.
Substantial Shareholders 31 Number of Percentage
December2011 Shares
Savannah Consortium 61,754,371 13.13
JP Morgan Nominees Australia 45,207,771 9.61
Limited
HSBC Custody Nominees 35,365,053 7.52
(Australia) Limited
National Nominees Limited 35,079,474 7.46
Main Australian Securities Trading Information
Listing: Exchange (AQP.AX)
Secondary London Stock Exchange ISIN number
Listing: (AQP.L) BMG0440M1284
Secondary JSE Limited (AQP.ZA) ADR ISIN number
Listing: US03840M2089
Convertible Bond ISIN
number XS0470482067
Broker (LSE) (Joint) Broker (ASX) Sponsor (JSE)
Liberum Capital Limited Euroz Securities Rand Merchant Bank(A
City Point, 1 Ropemaker Level 18 Alluvion division of FirstRand
Street, London, EC2Y 9HT 58 Mounts Bay Road, Bank Limited)
Telephone: +44 (0) 20 3100 Perth WA 6000 1 Merchant Place
2000 Telephone: +61 (0) 8 Cnr of Rivonia Rd and
Bank of America Merrill Lynch 9488 1400 Fredman Drive,
2 King Edward St Sandton 2146
London, EC1A 1HQ Johannesburg South
Telephone: +44 (0)20 7628 Africa
1000
Aquarius Platinum (South Africa) (Proprietary) Ltd
100% Owned
(Incorporated in the Republic of South Africa)
Registration Number 2000/000341/07
1st Floor, Building 5, Harrowdene Office Park, Western Service Road, Woodmead
2191, South AfricaPostal Address: PO Box 76575, Wendywood, 2144, South
Africa.
Telephone: +27 (0)11 656 1140
Facsimile: +27 (0)11 802 0990
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: info@aquariusplatinum.com
For further information please visit www.aquariusplatinum.com or contact:
In Australia
Willi Boehm
+61 (0) 8 9367 5211
In the United Kingdom and South Africa
Gavin Mackay
gavin.mackay@aquariusplatinum.com
+ 44 7909 547 042
Glossary
$ United States Dollar
A$ Australian Dollar
Aquarius or AQP Aquarius Platinum Limited
APS Aquarius Platinum Corporate Services (Pty) Ltd
AQPSA Aquarius Platinum (South Africa) (Pty) Ltd
ACS(SA) AquariusPlatinum (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 or $ United States Dollar
Everest Everest Platinum Mine
Great Dyke Reef A PGE bearing layer within the Great Dyke
Complex in Zimbabwe
g/t Grams per tonne, measurement unit of grade
(1g/t = 1 part per million)
JORC code Australasian code for reporting of Mineral
Resources and Ore Reserves
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
PCP Previous corresponding period
PGE(s) (6E) Platinum group elements plus gold. Five
metallic elements 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) (4E) Platinum group metals plus gold.Aquarius
reports the PGMs as 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
Run of mine.The ore from mining which is fed
ROM 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
Date: 09/02/2012 10:44:12 Produced by the JSE SENS Department.
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