UPDATE 1-Aquarius Platinum's loss more than halves as output rises

Fri Feb 7, 2014 6:41am EST

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By Esha Vaish

Feb 7 (Reuters) - Aquarius Platinum Ltd, the world's fourth-biggest platinum miner, reported a lower half-year loss as a rise in output from its Kroondal mine in South Africa lessened the impact of a drop in prices of platinum group metals (PGMs).

Aquarius, which operates mainly in the strike-prone South African platinum belt, reported a headline loss of $22 million for the half year ended Dec. 31, down from $56 million in the same period a year earlier.

Revenue slipped 2 percent to $113 million, while attributable production increased 7 percent to 168,014 PGM ounces. PGM metals include palladium, iridium and other metals.

The average U.S dollar PGM basket price dropped 5 percent in the half-year from the same period a year earlier, Aquarius said, while the rand basket price rose 13 percent as the South African currency weakened.

The company said it was concerned that dollar-denominated metal prices fell despite a primary deficit in PGM metal markets during 2013, which is forecast to increase in 2014.

Aquarius reported revenue of $106 million from Kroondal - a venture with Anglo American Platinum in the northwest province of South Africa.

"They are doing everything they can at Kroondal, which is an amazing operating performance, if we compare that to the rest of the Bushveld especially," Nomura Equity Research analyst Tyler Broda told Reuters.

The world's top three platinum miners -- Anglo American Platinum (Amplats), Impala Platinum Holdings Ltd and Lonmin Plc -- have interests in South Africa's Bushveld complex, the world's richest reserves of PGMs.

The three miners are trying to hammer out wage agreements with South Africa's largest labour body, the Association of Mineworkers and Construction Union (AMCU), to end a two-week strike that the country's Chamber of Mines says is costing the industry about $18 million a day in revenue.

AMCU members walked out at Amplats, Impala and Lonmin on Jan. 23.

London-listed Aquarius Platinum was largely shielded from the strike as it signed a one-year agreement with the National Union of Mineworkers last June. The company said in January that it expected the strike at other miners to help it post higher revenue and better margins.

"Having already reached a wage agreement at Kroondal, Aquarius may benefit from production disruptions at the major producers should they result in higher PGM price in the short term," BMO Capital Markets analyst Edward Sterck said in a note.

UNCERTAINTY IN ZIMBABWE

Aquarius Platinum raised concerns last month about its Mimosa mine in Zimbabwe, as proposed tax changes and regulatory uncertainty had left it unable to plan future production levels and capital allocation.

Zimbabwe's platinum sector has largely been an attractive zone for foreign miners due to its current low tax environment.

However, foreign miners are jittery about the looming threat of President Robert Mugabe's controversial indigenisation policy and additional taxes proposed in the 2014 budget.

"The implementation of further taxes would have a significant negative impact on the profitability and cash flows of the entire Zimbabwean platinum sector, particularly in the current low price environment," the company said.

Analysts also raised concerns about Aquarius Platinum's ability to pay out a $300 million convertible loan due in 2015.

"Our concerns remain as to whether the operational improvements alone are sufficient to warrant the refinancing of the $300 million convertible which falls due at the end of next year, while the platinum pricing environment remains weak," Investec Securities analysts said in a note to clients.

The company had a cash balance of $83 million at the end of 2013.

Aquarius Platinum's shares were largely unchanged at 39.25 pence at 1042 GMT on the London Stock Exchange on Friday.

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