JOHANNESBURG (miningweekly.com) – Platinum-group metals (PGM) producer Eastern Platinum (Eastplats) has no plans to resume production at its mothballed Crocodile River mine (CRM) and would only consider reopening the loss-making operation if it was confident production would be sustainable.

The South Africa-focused miner, which narrowed its third-quarter loss from $5.7-million in the prior year’s comparable period to $4.6-million for the three months ended September 30, announced in June that it would place its 87.5%-owned CRM operation on care and maintenance, citing a stagnant global outlook, sustained PGM price weakness and a volatile operating environment.

Eastplats reported in a results statement on Friday that it would continue to reassess the viability of reinitiating funding for development and production once conditions supported such a decision.

“Should there be a sustained strengthening of PGM prices and a marked improvement in the operating environment in South Africa, the company can react quickly to ramp up activities at CRM,” it noted.

The closure of CRM followed the suspension of development at Eastplats’ 87%-owned Mareesburg and Kennedy’s Vale projects in 2012, rendering the June 2013 quarter the last full quarter in which the company produced PGM ounces.

“As a result of the suspension of production, we believe that it is not meaningful to compare the three months ended September 30, 2013, during which 654 oz of PGMs were produced, against the operations of the three months ended September 30, 2012, which saw output of 21 273 oz,” Eastplats stated.

Comparing the nine months ended September 30, 2013, to the prior year’s comparable period, the period under review saw the company selling 27 352 oz, a decrease of 62% compared with the 2012 period, primarily as a result of a planned reduction in stoping activities and the shutdown of production at CRM.

This led to a 61% decrease in run-of-mine ore processed to 267 368 t compared with 691 516 t in the first nine months of last year, leading to a decrease in concentrator recovery from 77% in the comparable prior year’s period to 69% in the period under review.

A decrease in head grade from 4.04 g/t in the first three quarters of 2012 to 3.84 g/t in the nine months ended September 30, as well as a fatality at CRM in February, also depressed production and mining activity at the now-closed operation.

Eastplats recorded an average delivered basket price of $918/oz in the period under review, compared with $923/oz in the prior year’s period.

Total rand operating cash costs for the nine months decreased 40% compared with the same prior-year period as a result of a decrease in mining costs that resulted from the 62% drop in PGM production.

However, the decrease in total rand operating cash costs in the third quarter was offset by the inclusion of some R52-million in retrenchment costs incurred in June related to the scaling down of operations at CRM.

“On a per ounce basis, rand operating cash costs increased 59% from R8 732/oz in the first nine months of 2012 to R13 872/oz in the period under review, owing largely to a 62% decrease in ounces sold,” Eastplats said.

OUTLOOK

Subject to the availability of adequate funding, the company noted that development of the Mareesburg project would restart only once market and operating conditions supported this, citing a current lack of sufficient funds in the form of cash and short-term investments to complete the development and construction of the openpit mine and concentrator.

This was despite the company having successfully negotiated a definitive facilities agreement in 2011 with UniCredit Bank and Standard Finance for a $100-million financing package that would be used to part fund the development costs of the project.

“Owing to the suspension of the project, the facilities agreement was terminated in 2012, but the banks have agreed to investigate the restructuring of the
financing package when the project is restarted. There is, however, no assurance that a restructuring of the financing package will be available to Eastplats or, if available, that this funding will be on acceptable terms,” Eastplats stated.

Looking ahead, the miner believed that, given the stagnation of the European car market, which consumed around 50% of South Africa’s platinum production, together with a continuing resistance to any significant meaningful production cuts from the larger PGM producers, the industry would have to contend
with far lower PGM prices than initially projected.

“At the same time, the South African PGM industry continues to experience a number of adverse economic factors, particularly ongoing labour unrest, unrelenting operating cost inflation and heightened concerns with
respect to reliable power delivery.

“Ongoing cost pressure and decreasing productivity in South Africa will continue to significantly reduce free cash flow for the industry,” said the company.