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Aquarius Platinum has closed its second mine in two weeks in an effort to conserve cash, saying that strikes and depressed platinum prices had made the Everest mine in South Africa unprofitable.
The mine accounts for 21 per cent of the Aquarius’s platinum group metals (PGM) production. Aquarius said yesterday that the mine had been losing money because of a temporary dip in ore quality and staff disruptions following a new union – the AMCU – gaining representation. Everest has been put on care and maintenance rather than shut down permanently, and Aquarius said that it would reopen when platinum prices and relations with workers improve.
This month Aquarius, the world’s fourth-largest platinum producer by volume, mothballed its Marikana mine, also located in South Africa’s platinum-rich Bushveld region. Marikana is jointly owned with Anglo Platinum, part of London-based Anglo American, and accounts for 11 per cent of Aquarius’s PGM production.
The moves follow a recent warning from Stuart Murray, chief executive, that the platinum mining sector’s prospects were threatened by “unabated cost inflation, little fundamental demand recovery and continuing volatility in financial markets”.
The price of PGM, which are used in vehicle catalytic converters to cut exhaust emissions, has been hit by a fall in car sales, especially in Europe, as well as a drop in investment demand.
Aquarius added on Thursday: “The board is of the view that the platinum market is in an abiding surplus, with the industry generating nearly half a million ounces of unneeded platinum each year due to the current European economic crisis, among other factors.”
The company said that it would be relatively simple to reopen both Everest and Marikana, but that the South African rand-denominated PGM price would have to be 30-40 per cent higher than the current level of about R9,700 an ounce to make it worthwhile.
“We’re still firm believers in a recovery in platinum group metals, but with Europe in its current malaise it is unlikely to be in the next year or two,” said Aquarius.
The group said “no other mine closures are envisaged” and that its flagship Kroondal mine in South Africa was still making money. Aquarius has about $200m of cash on its balance sheet.
Investors will now be watching whether the industry’s three biggest producers – Anglo Platinum, South Africa-based Impala Platinum and London-listed Lonmin – cut their output, as this will have more effect on reducing oversupply in the market than Aquarius’s shutdowns.
But plans for further mine closures could be hampered by political sensitivities in South Africa, the world’s leading producer of platinum, where unemployment is high and a debate continues about greater government intervention in the country’s mining industry.
Aquarius’s London-traded shares fell 11 per cent to 53.1p on Thursday. The stock has fallen more than 80 per cent in the past year.