Everest platinum mine restart more than a year away - Aquarius

Aquarius Platinum's Everest mine could be more than a year away from resuming production needing an improvement in commodity and currency markets, and completion of its Ridge Mining acquisition.

LONDON - 

Aquarius Platinum's Everest mine could be more than a year away from resuming production given weak markets and a planned acquisition, a spokesman for the No.4 platinum producer said on Wednesday.

The spokesman said two events would have to happen before production could resume at the South African mine -- an improvement in the macroeconomic environment, specifically commodity and currency markets, and completion of its acquisition of Ridge Mining.

"The Ridge ramp up will be the focus ... and only then will we really turn our full attention to Everest," the spokesman said when asked whether it would be late 2010 before full production resumed.

"One might presume it will take a year to complete the ramp up at Ridge and that will take us through to Everest," he added.

However, the spokesman said the company was reluctant to put a specific date on Everest because there were so many variables.

The Everest mine, which produced 157,995 platinum group metal (PGM) ounces in 2008, was shut last December due to subsidence after a third of the usual rainfall for an entire year fell in one day.

The company plans to start work on resurrecting the Everest mine soon while the construction of two new declines into the mine is due to start either during or after the country's rainy season, which is during the country's summer.

PRODUCTION, COST PRESSURES

The Aquarius spokesman said it was "satisfied" with its production in the fourth quarter to the end of June and with its costs given the very strong increases seen by its peers in the industry.

"We've been quite happy with the production we've achieved in the first two months of the fourth quarter," the spokesman said.

The group's operations are making good progress and it is confident about the ramp up of its facilities at the Kroondal, Marikana and Mimosa mines in South Africa and Zimbabwe.

The company saw a good reduction in unit costs over the last few quarters as it improved efficiencies and with lower prices for consumables, particularly in the latter part of 2008.

However, price pressure started to pick up in its last quarter and are likely to continue to have an impact.

"There was a lot of price pressure in the last few weeks of the fourth quarter. The costs outlook is looking tricky," the spokesman said.

Shares in Aquarius, which were down 1 percent ahead of the comments extended their losses to trade down 7 percent at a session low of 216.25 pence.

The stock closed 2.7 percent down at 226.25 pence despite a broad rally for UK mining stocks.

Rebecca O'Dwyer, an analyst at Investec Securities, said the shares were lower on the Everest news and on the comments about the cost outlook and prices being under pressure in the fourth quarter.

Increasing labour costs, higher fuel prices, and the rand trading close to 10-month highs against the dollar are all likely to have an impact in the current financial year.

Aquarius said that while the dollar basket price for precious metals had remained pretty reasonable, in rand terms prices have dropped about 20 to 25 percent and the stronger rand is having an impact on margins in the short term.

South African utility Eskom has been granted a 31.3 percent tariff rise starting on Wednesday, while labour costs are up around 15 to 20 percent but the spokesman said Aquarius would be hit less severely than some.

"As a mechanized miner diesel is one of our main costs whereas our competitors are more sensitive to electricity prices," said the spokesman.

Labour is responsible for about 45 to 50 percent of the company's costs, although the group's use of contractors means it has more flexibility than some rivals. ($1=7.716 Rand)

(Editing by Paul Hoskins and Karen Foster)

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