Two years before $298-million of debt matures, investors are saying Aquarius Platinum risks having to sell assets to repay bondholders as the company’s cash dwindles, amid South African mine closures and falling metal prices.

The yield on the company’s 4% convertible notes due in December 2015 is 16.51% currently, 5.99 percentage points higher than last year’s low in February. The average dollar yield of emerging-market metals and mining companies climbed 121 basis points in the period, JPMorgan Chase & Co indexes show.

The company, with all but one of its platinum assets in South Africa, the world’s biggest producer of the metal, is struggling to boost cash after it shut three mines since 2011 after a 19% drop in prices and rising power and wage costs. Perth-based Aquarius held the equivalent of $91-million in cash as of September 30, down 12% from June.

“I’m sure they don’t like to fall back on asset sales but they’re going to have to,” Esther Krukowski, an analyst at BlueBay Asset Management, which oversees $56-billion, said last week. Refinancing “is a possibility only if platinum prices rise and they make operational progress”, she said.

Charmane Russell, a spokeswoman for Aquarius at Russell & Associates, in Johannesburg, declined to comment. Aquarius set the initial price to change the debt into equity at $6.773 a share in November 2009. The shares closed at the equivalent of 64 US cents in Sydney at the end of last week. “They can’t repay that money from cash flows,” said Louise Collinge, an analyst at Investec, in London. “They could potentially repay a bit of it if we’ve got a steady increase in platinum-group metal (PGM) prices in future. It is not an easy situation that they’re in.”

Aquarius’s output declined from 422 645 oz of PGMs during the 2010 fiscal year, when the bonds were issued, to 325 103 oz in 2013 after closing three mines. It reported earnings before interest, taxes, depreciation and amortisation (Ebitda) of $70-million for the year ended June 30, according to an August 8 filing. Ebitda will be $65.4-million in the 12 months through June and $85.2-million in fiscal 2015, according to the median estimate of 16 analysts polled by Bloomberg.

Platinum is mined together with other metals, including palladium and rhodium.

Aquarius plans to improve efficiencies at the Kroondal joint venture with Anglo American Platinum, the world’s biggest producer of the metal, and will take a year to 18 months to assess metal prices and debt markets to decide how it will refinance the remainder of the bond not paid for by cash flows.

Respite could come from “sharply” higher platinum prices due to a global shortage of the metal and as the risk of strikes at South Africa’s major producers, including Anglo American Platinum, Impala Platinum Holdings and Lonmin, increases, says Tyler Broda, an analyst at Nomura International.

The spot price of platinum, used in autocatalysts that convert car emissions into less harmful substances, traded around $1 410/oz last week.

The Association of Mineworkers and Construction Union, the largest representative of employees at the three biggest producers, has received permission to strike from the State’s mediator owing to a wage dispute. Aquarius last year concluded a wage deal with the National Union of Mineworkers, the biggest labour organisation at the company.

“If everybody shuts down except for Aquarius, that’s not going to be bad for the company,” said Broda. Should Aquarius’s share price rise, “more money can be raised at less dilutive levels”, said.

The high yields on the bond show the market believes Aquarius will find it difficult to refinance the notes, says Carole Ferguson, a research analyst at SP Angel Corporate Finance. “If the market doesn’t improve, they may need to make some tough decisions on the assets.”