Falling costs are dark clouds' platinum lining - Aquarius

Aquarius Platinum says while costs are key in the current environment, the company stands to benefit from lower costs in the current, second quarter.

JOHANNESBURG -

Aquarius Platinum (JSE:AQP, ASX;AQP, LSE:AQP) said today it may benefit from a reduction in costs in the current second quarter of the 2009 financial year, while the company expects a negative metals price revenue adjustment of $34.2m in the same quarter.
Aquarius spokesperson Nick Bias said today that in the current environment there were three further opportunities to bring costs down; the falling prices of consumables such as diesel and steel, the weaker rand and lower prices of mining consumables.
He said Aquarius would start to benefit from these factors in the current quarter and stressed that costs were "key" right now as it was one of few macro economic factors that could be influenced by mining companies.
The company had already achieved a reduction in unit costs in the first quarter. It reported a reduction in cash costs per ounce at Kroondal, Marikana, Mimosa CTRP and Platinum Mile mines.
"In this quarter we will benefit (cost reductions) from a combination of the macro scene and what we achieve internally. The dark clouds do have a platinum lining," Bias confirmed.
Aquarius also said in a statement that looking to the second quarter 2009, it was anticipated that reductions in unit costs would be achieved again as production increased further and falling prices for diesel, chemicals and steel started to flow through to the cost base.
In addition, US$ weakness was expected to provide some respite as the falling price of consumables starts to feed through to costs during the second quarter.
Bias said the company was "well-positioned" on the cash cost curve of the platinum industry as it believed its cash cost of production was lower than that of major producers Anglo Platinum and Lonmin.
Aquarius' attributable production increased 17% to 128,366 PGM ounces in the first quarter.
The company saw its strategy of owner-miner paying dividends at Everest mine in the last quarter as it managed to boost production by 3% here, while it also took charge of human resources and management at Marikana and Kroondal, which "helped to turn production around". Kroondal saw an increase of 22% in production and Marikana a 37% increase.
"Those revised industrial relations models started to pay off as production increased and costs came down," said Bias.
Commenting on the company's position on the industry cash cost curve, Blue Oar Securities mining analyst Alison Turner told Mineweb Aquarius Platinum was one of the lowest cost producers in the industry, with the bulk of its assets situated in the bottom quartile.
"As such, we believe that the company is very well placed relative to peers to withstand a downturn.
"Through the suspension of operations at the Marikana number 2 shaft, Aquarius has also demonstrated a willingness to react timeously to industry conditions, and in the event that prices were to deteriorate further we would expect to see further cuts at Marikana - most likely in the opencast operations."


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