Aquarius’ stated focus on improving its operational performance continued during the quarter and delivered results in the form of improved ounce production and cost performances.This is according to Jean Nel, CEO Aquarius Platinum who also said that the significant improvements at Kroondal against the backdrop of volatile regional industrial relations is particularly pleasing. The highlights of the quarter being the successful conclusion of wage agreements with the representing unions at Kroondal without any operational interruptions and the extension of the Kroondal mine life by three years to approximately 9.5 years following an agreement reached with Amplats, its partners at Kroondal. The improved operational performance, however, was more than off-set by the significant decrease in dollar metal prices which, combined with an operating environment which continues to be difficult and complex, reinforces the imperative of continued operational focus and improvements. Against this back-drop, Aquarius stated focus on operational improvements and treasury preservation will continue unabated into the new financial year. Operating Review Summary (all numbers on 100% basis) AQUARIUS PLATINUM (SOUTH AFRICA) (PTY) LTD (Aquarius Platinum – 100%) Kroondal Production at Kroondal for the quarter was 1.765 million tonnes, up 5% compared to the previous quarter. The improvement was achieved although the total vamping contract was cancelled during the previous quarter. Six Section 54 stoppage instructions were issued by the Department of Mineral Resources (DMR) of which one was lifted immediately following discussions with the relevant Principal Inspector of Mines. The remaining Section 54 notices were dealt with through a comprehensive investigation and action plans that were presented to the DMR P&SA2 at Marikana (Aquarius Platinum 50%) Given the continuing low Rand PGM basket prices, Marikana 4 shaft, the remaining operating shaft, and the processing plant at Marikana continue on care and maintenance until further notice. Everest Mine Similarly the Everest mine remains on care and maintenance until further notice. Development of the K6 shaft infrastructure at Kroondal continues. The transition from underground mining contractor to Aquarius took place on 1 May 2013 and has been successfully completed. The K6 shaft sinking project was completed within budget and ahead of time. Almost all other project and growth capital expenditure has been placed on hold, pending improved market conditions. The company is continuing with the necessary maintenance capital expenditure required by its operating mines. P&SA 1 at Kroondal (Aquarius Platinum 50%) – 12-month rolling average LTIFR deteriorated to 1.14 per 200,000 man hours from 1.05 in the previous quarter – Production increased to 1,765,000 tonnes from 1,686,000 tonnes, quarter-on-quarter – Head grade improved from 2.36 g/t to 2.38 g/t – Recoveries deteriorated by 1% to 79% – Volumes processed increased to 1,771,000 tonnes – Stockpiles at the end of the quarter totalled approximately 19,000 tonnes – PGM production increased by 2% to 106,872 PGM ounces, quarter-on-quarter – Revenue decreased by 12% to R950 million, quarter-on-quarter, due to weaker basket prices and negative pipeline adjustments – Mining cash costs decreased by 7% to R467 per tonne, due to improved volumes – Unit cash cost per PGM ounce reduced 7% to R7,746 per PGM ounce due improved volumes – Kroondal’s cash margin for the period deteriorated from 20% to 13% due to lower PGM prices MIMOSA INVESTMENTS (Aquarius Platinum 50%) Platinum Mile: The production results for the quarter improved as a result of an increase in the tons treated and continuous focus on improving the fine grinding efficiencies within the operation. During the quarter, the company purchased three second hand coarse grinding mills from Anglo. These mills are in the process of being moved and installed at the operation and should come into production within the first quarter of 2014. Chromite Tailings Retreatment Plant (CTRP) (Aquarius Platinum 50%) This operation remains on care and maintenance. Mimosa Platinum Mine – 12-month rolling average DIIR improved to 0.05 per 200,000 man hours worked – Production was static at 590,705 tonnes, quarter-on-quarter – Head grade constant at 3.66g/t
– Recoveries were 77.90%– Volumes processed increased by 11% to 625,541 tonnes – Stockpiles at the end of the quarter totalled approximately 115,821 tonnes – PGM production increased by 11% to 57,168 PGM ounces, quarter-on-quarter – Revenue increased slightly to US$70 million, due to higher metal sales volumes – Mining cash costs were constant at US$80 per tonne, and costs per PGM ounce were also static at $871 – Stay-in-business capital expenditure was $121 per PGM ounce for the quarter – Mimosas cash margin for the period decreased from 34% to 25% due to primarily due to lower metal prices Operating cash costs per ounce Unit cash costs per PGM ounce (before by-product credits) remained at the same level as those achieved in the previous quarter. Capital expenditure The total capital expenditure for the fourth quarter amounted to $7.47 million. Expenditure was incurred mainly on mobile equipment, drill rigs and LHDs; the conveyor belt extension; down dip development; housing project; and Phase VI prefeasibility studies. Tailings operation Platinum Mile (Aquarius Platinum 91.7%) – Material processed increased 11% to 1.014 million tonnes – Head grade increased to 0.87 g/t – Recoveries increased to 17% – Production increased to 4,819 PGM ounces – Cash costs decreased to R6,220 per PGM ounce – Revenue was R44 million for the quarter – The cash margin for the period was 27%, an increase from 20% in the previous quarter CORPORATE MATTERS Wage agreements reached at Kroondal Aquarius’ wholly owned subsidiary, Aquarius Platinum (South Africa) (Proprietary) (AQPSA) Limited concluded a wage agreement with the National Union of Mineworkers (NUM) in relation to its members employed at the Kroondal mine. The Kroondal mine currently employs approximately 8 120 people including contractors and the NUM is the majority union at the mine, representing Kroondals Cat B, semi-skilled work force. Post quarter, AQPSA also reached a wage agreement with Solidarity representing Kroondal’s Cat A, skilled workforce. Both agreements provide for an on average increase which slightly exceeds the increase in the cost of living as measured by inflation rate (CPI-X) and come into effect from 1 July 2013 and will remain in place for one year. The successful conclusion of the wage agreement is a significant positive development for the company, particularly in the difficult environment the platinum sector is currently experiencing. AQPSA is extremely proud of its workforce which continued to work uninterruptedly to maintain its operating performance throughout the negotiation process. Extension of the Kroondal PSA The company reached agreement with a wholly owned subsidiary of Anglo American Platinum (Amplats) to extend the Kroondal PSA arrangement. The agreement increases Kroondal’s life-of-mine by approximately three years from approximately 6.5 years to approximately 9.5 years. Market conditions during the quarter The PGM Rand Basket price experienced significant volatility, firstly getting dragged down to R11 000 per oz by the fall in metal prices, then spiking back up to R13 000 per oz on a severely weakening rand, only to be dragged back down to R11 000 per oz by the end of the quarter. Reasons for gold’s dramatic price drop (and parallel reaction in platinum) at the start and end of the quarter include the breaking through of technical levels and a tapering of quantitative easing expectations from the US Federal Reserve. However the movements in gold and platinum ETFs have been in opposite directions. Since mid-May over 500 000 oz have been added to global platinum ETF holdings (35% increase) in anticipation of operational disruptions in South Africa, while gold ETFs sold 14Moz (-18%). Auto catalyst platinum demand remains challenging with lowest vehicle sales in May for 20 years. Jewellery demand will likely have increased with the recent USD metal price drop but more so for gold than platinum. Primary supply remains steady with capacity cuts yet to be enacted and relatively low amount of operational disruption apart from the continued usage of Section 54 notices. Secondary supply from recycling is also likely to have fallen with prices. The average platinum price decreased by 10%, while palladium decreased by 4% and rhodium decreased by 6% quarter-on-quarter. Gold fell by 13% on average. Platinum closed the quarter down 16.3% at $1,337 per ounce, while palladium fell by 15.8% to $659 per ounce and rhodium fell by 18.7% to $1,000 per ounce. Gold fell 23.5% to $1,224 per ounce. The average rand-dollar exchange rate weakened during the quarter, falling by 6% from R8.87 to R9.41 to the USD. Since then, it has traded in a narrow range to average R10.02 in the first two weeks of July. The average rand basket price for the quarter decreased by 4% quarter-on-quarter, and since quarter end the spot price has improved by 0.5%. The USD weighted average group basket price deteriorated by 8% to $1.186 per 4E ounce compared to the previous quarter. The average South African basket price at AQPSAs operations was R11 294 per PGM ounce for the period. Subsequent to the end of the quarter, the PGM basket price consolidated to average R11 355 per PGM ounce for the first two weeks of July, recording a low of R10 938 during July.