UPDATE: Aquarius Platinum Production
According too Reuters, the worlds fourth largest primary platinum producer Aquarius Platinum said on Monday it could produce some 40,000 ounces less platinum group metals in the full year than previously foreseen, as the impact of work stoppages hurts output at the number four platinum producer.
Aquarius Platinum has been uniquely successful in bringing into operation small, shallow, relatively low-grade PGM deposits using innovative technologies and mining methodologies. The Company has developed a clear set of differentiators which give it a significant competitive advantage over larger conventional PGM producers which historically have tended to exploit the deeper, more capital-and labour-intensive PGM deposits in South Africa.
In an interview at the start of Platinum Week, Aquarius Chief Executive Stuart Murray said production had been hit by tough operating conditions, especially labour stoppages, in South Africa, source of around three-quarters of the world’s platinum each year.
“It will be a lot less than that,” he said. “We are not right now prepared to give guidance. we have just done some shaft closures at Marikana, and we are looking at continuing to trim as and where necessary. It will probably be around circa 400,000 (ounces).”
“We are talking about trying to produce profitable ounces. I am not interested in the production of ounces to meet guidance. I am interested in the production of ounces that make a contribution to profit, for the shareholders.”
Prices will have to rise significantly from current levels to justify further expenditure within the industry, he said.
“To achieve a decent return for a producer who has already invested his capex you would probably be looking for a price circa $2,000,” Murray said.
“For a producer who is still looking at sinking new shaft systems and whatever else without the benefit of existing cashflows, you are probably looking at a price of $2,600, $2,800, $3,000 maybe. It’s hard to see that in the current environment.”
Platinum prices are currently below $1,500 an ounce and at a historically unusual discount to gold, which is less exposed to the economic cycle than industrial metals platinum and palladium, and which has benefited more from investors’ interest in hard assets since the start of the financial crisis.
A fall in PGMs demand has largely offset the impact of supply constraints linked to work stoppages, particularly those related to safety and strikes, and mounting cost pressures.
A strike at number two platinum producer Impala Platinum earlier this year reportedly cost the company 120,000 ounces of metal, but its impact on underlying prices was short-lived.
Murray said while he believed the South African government was worried about the implications for employment of a weakened mining industry, union activity was a major problem for miners.
The Impala strike saw the emergence of a powerful new union, the Association of Mineworkers and Construction Union (AMCU), which Murray said is a concern for Aquarius.
“It has done a lot of damage to our business since last October, and continues to damage our business,” he said.
“Whilst I understand the constitutional right of freedom to associate, if unions are going to play political games, I can tell you who the net losers are going to be. It’s going to be employment, and I think that’s a great shame.”
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