TSX-listed platinum miner Eastern Platinum (Eastplats) has advised that, due to the continuing negative outlook in the global economic environment, the sustained weakness in PGM pricing and the current stressed-operating environment in South Africa, it has decided to suspend funding for the Crocodile River Mine (CRM) Development Plan, previously announced on June 12, 2012.The development plan was implemented to reduce costs and improve efficiencies, and to return the mine to profitability. It involved accelerated underground development resulting in reduced stoping production and increased “on-reef” development in the near term, which would yield significant increases in mineable reserves, production, and operating flexibility in the medium and long term. Eastplats explained that the consequence of this funding suspension is that the mine will enter a Section 189 process with the four representative unions, through which it will use constructive engagement to determine restructuring measures. This process is expected to last for at least 60 days as envisaged by the Labour Relations Act. The company said it will continue to reassess the viability of production at CRM and reinitiate funding for production once conditions support such a decision.
“While production costs have increased by over 15% per annum in the last six years, production has fallen by almost 20% in the same time frame, and the metal price in rand terms has decreased. The situation in which CRM finds itself is simply not sustainable.“Eastplats has invested more than R8 billion in South Africa since 2006, particularly in infrastructure and development that will stand the mine in good stead for the future when production is able to resume. Eastplats will continue to fund CRM’s social and environmental obligations during the funding suspension period, said Eastplats CEO Ian Rozier. He added that Eastplats remains committed to South Africa and to its PGM operations at CRM, however cautioned that to continue mining in current circumstances would be irresponsible and not in the interests of shareholders or any other stakeholders, as it undermines the long-term sustainability of the operations, could result in the sterilization of assets and could, potentially, compromise safety and health. “The company will do everything it can to reduce job losses, and will engage constructively with unions in this regard. Eastplats had advised the Minister of Mineral Resources that they were considering this course of action, and will continue to keep the DMR apprised of developments,” he concluded.