An increase in the number of work stoppages on safety grounds hit output in the final quarter of 2011 at platinum miner Aquarius Platinum, and seriously tried the patience of the group's Chief Executive Officer.
Output of platinum group metals (PGMs) attributable to Aquarius in the October to December quarter - the second quarter of the company's fiscal year - fell 4% from the preceding quarter to 105,629 ounces.
Average PGM dollar prices fell back in the quarter, with platinum and palladium prices down 14% and 17% respectively, while the average price of rhodium fell 16% from the preceding quarter.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The South African rand declined by 13% against the US dollar on average from the preceding quarter, but was more or less unchanged on a year-on-year basis.
Stuart Murray, Chief Executive Officer of Aquarius Platinum, said the final quarter of 2011 was a challenging one and has prompted the company to contemplate changes.
"The period saw the tail-end of our recent operational challenges
and was exacerbated by deteriorating economic conditions, increased Section 54 [safety issue] stoppages across the Rustenburg district and continued under-performance by the lead mining contractor. This last factor has caused AQPSA {Aquarius Platinum South Africa] to begin a review of this contractual relationship as the current cost-reimbursable model is untenable in the current environment," Murray said.
Murray's frustration at interruptions to production was clearly evident, as he bemoaned the "widespread (and sometimes unjustified) application of Section 54 safety stoppages," which he said is making the South African mining industry a difficult place in which to operate.
Treading carefully around the potentially volatile subject of worker safety, Murray said that "whilst zero-harm is laudable, there must be practical implementation of the law." Murray also had a moan about the length of time taken by the regional department to resolve these stoppages, which has risen from "some two days to a week or sometimes more", Murray claimed.
The group's Everest mine is now also under an optimisation study as a result of near-term poor ground conditions, lower prices and the significant delays in permitting the open-cast reserves.
Turning the focus of his ire on Zimbabwe, Steiner said negative regulatory impositions continue to escalate there. "All these relentless challenges make it clear that some of the stakeholders in both countries in which we operate simply do not grasp the fact that there are only 100 cents in the Rand and 100 pennies in the Dollar. There is simply no more to be taken before the operations are threatened," Steiner warned.
"PGM margins are now low in both Rand and Dollar terms, and oversupply (relative to real consumption) coupled with a poor economic outlook is likely to ensure that this remains the case, at least in the short term," Steiner observed, while having another dig at rising regulatory pressures.
No company trading statement, however long the rant by the boss goes on, is complete without a testament to the management's ability to surmount challenges, and the Aquarius announcement was no different in this regard, with Steiner claiming that the company's willingness to plan for low margins to preserve cash left it well placed.
"We have operational flexibility, lower capital expenditure requirements, and a willingness to adjust both strategy and production volumes to the dictates of the prevailing economic and political conditions, and not to the holy grail of
production at all costs," Steiner said.
The shares fell 4.6p to 174.6p in the first hour of trading after the announcement by Aquarius.
jh
‘Inheritance tax insurance’ enquiries are soaring – but is it worth it?
MPs warn over Lifetime ISAs which could leave savers out of pocket
