Aquarius Platinum – to mothball 1 mine is understandable but 2?

An amazing statement from Aquarius Platinum (AQP) this morning. Having mothballed its Marikana mine 10 days ago, it is now mothballing Everest. It says that it will keep one mine (Kroondal) and its small tailings operations open to maximise near term cashflow. What it says about the Platinum market is gob-smacking.

I know that the Daily Telegraph’s Questor editor thought Platinum a better bet than gold. I disagreed. Platinum is a precious metal but also has industrial uses (ie in catalytic convertors) and the woes of the Eurozone mean that, as Aquarius states baldly today, that demand is running at 0.5 million ounces a year less than supply and that the platinum market faces an “abiding surplus” Put this in perspective – last year, global production of platinum was 6.4 million ounces. And I warn you that Chinese demand for jewellery was 1.6 million ounces – I cannot see that going up as the Chinese economy slows.

At 54.5p Aquarius is now valued at £258 million. It had $208 million cash at March 31st but that number has clearly gone down. Having recorded on-mine EBITDA of $2.2 million in that quarter the further drop in PGM prices means it must be running at a loss so what is the cash now? £130 million? £100 million? I have no idea – it would be helpful if the company gave us a number. Maybe Kroondal + tailings + whatever Aquarius can get out of Mimosa in Zimbabwe ( I would not bank on a lot) will allow Aquarius to preserve most of its cash until PGM prices pick up (as a result of other mines being mothballed as well as those of Aquarius). But right now I cannot see a lot of visibility for this company. I cannot say that I would be rushing to bottom fish.