Eastern Platinum Reports Record Quarterly Revenue, Continued Increases in Production and Development At CRM, Current Cash Positi
14 Mai 2007 - 3:00PM
UK Regulatory
FOR: EASTERN PLATINUM LIMITED
TSX, AIM SYMBOL: ELR
May 14, 2007
Eastern Platinum Reports Record Quarterly Revenue, Continued Increases in Production and Development
At CRM, Current Cash Position in Excess of $250 Million
VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - May 14, 2007) - Eastern Platinum Limited ("the Company")
(TSX:ELR)(AIM:ELR) is pleased to report record quarterly revenue of $35.5 million for the third
quarter ended March 31, 2007 ("Q3-07") a 25% increase over the $28.4 million in the previous quarter
from integrated operations at its direct and indirectly held interests in South Africa.
Highlights for the quarter are:
- Production and sales of 26,807 ounces of platinum group metals ("PGM"), up from 25,873 ounces
produced in Q2-07, the previous quarter.
- Revenues of $35.5 million with operating costs of $22.4 million.
- Operating margin in the quarter was $373.63/oz PGM an increase over the $228.31/oz PGM in the
previous quarter.
- Adjusted Net Income of $8.9 million with a reported net loss of $(11.2 million) as a result of
accounting or stock based compensation in the period o $14.2 million and from the foreign exchange
loss or the quarter o $1.6 million.
- At May 11th, 2007 the Company had a cash position (including temporary investments) in excess of
$250 million.
Operational highlights at the Barplats Crocodile River Mine ("CRM"):
- The Company continues to be below the PGM market average on Lost Time Injury Frequency Rate (LTIFR)
at 3.22 in the quarter and at 2.66 for the nine months ended March 31, 2007.
- Accelerated development continues at the Zandfontein section of the CRM.
- Continues to equip the existing 500m deep vertical shaft at the Zandfontein section of the CRM. The
vertical shaft option is considered to be the most effective method to access the deeper portions of
the Zandfontein Section. The shaft will be commissioned by March 2008 and will support a production
level of 120,000 tonnes per month from this section.
"The results reported this quarter reflect the excellent progress being made on all fronts,
particularly at CRM where the development of reserves is building a strong foundation for the mine's
continued success," stated President and CEO, Ian Rozier.
"Progress at CRM, our increased interest in Barplats to 74%, excellent assay results from Spitzkop,
our approved JSE listing, and the strong fundamentals of the PGM sector, are all extremely positive
for the outlook of the Company's future prospects," he stated.
Teleconference call details:
Eastern Platinum Limited will host a telephone conference call on Monday, May 14, 2007 at 1:30 p.m.
Pacific Standard Time (4:30 p.m. Eastern) to discuss these results. The conference call may be
accessed by dialing Toll-free 1-800-319-4610 from Canada and the United States, or 1-604-638-5340
internationally.
The conference call will be archived for later playback until May 21, 2007 and can be accessed by
dialing 1-800-319-6413 using the pin code 3926 followed by the number sign.
Please go to www.eastplats.com to review our Management's Discussion and Analysis of Financial
Conditions and Results of Operations. The full financial statements and management discussion has been
filed on SEDAR at www.sedar.com and are available on the Company's website, www.eastplats.com. Eastern
Platinum Limited trades on the TSX and AIM stock exchanges under the trading symbol ELR.
Results of Operations for the three and nine month periods ended March 31, 2007
/T/
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Three months ended Nine months ended
March 31 March 31
2007 2006 2007 2006
Production 5 PGE + Au oz(1) 26,807 0 75,338 0
Realized Basket Price per oz(2) $ 1,270 $ 0 $ 1,185 $ 0
Canadian $ '000's
Total revenue $ 35,459 $ 0 $ 89,272 $ 0
Total Cash Costs(3) $ 22,367 $ 0 $ 58,413 $ 0
Depletion and depreciation $ 3,076 $ 0 $ 9,561 $ 0
Total Production Costs $ 25,443 $ 0 $ 67,974 $ 0
Adjusted Net Income(4) $ 8,862 $ (572) $ 18,490 $ (1,805)
Net Income (Loss) for
the period $ (11,248) $ (1,083) $ ( 6,314) $ (1,475)
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(1) 5 PGE + Au represent Platinum, Palladium, Rhodium, Ruthenium, Iridium
and Gold
(2) Realized Basket Price is the price received under the off-take
agreement and is net of associated smelter costs.
(3) Total Cash Costs is a non-GAAP measure and is used in this MD&A and
represents all costs associated with production and development and
excludes amortization, depreciation and inventory accounting
adjustments.
(4) Adjusted Net Income - is a non-GAAP measure used in this MD&A and
defined by the Company as Net Income before interest (income and
expense including foreign exchange gains/losses), accounting for
stock based compensation and non-controlling interests, taxes (income
and capital), depreciation and amortization (including depletion) is
a non-GAAP measure. See Adjusted Net Income note in section 15 for
more details.
/T/
Review of Financial Results
The Company acquired a 69% indirect interest in Barplats which owns CRM and the Kennedy's Vale Project
(a separate development property) in April 2006. Revenues and costs directly attributable to activity
at CRM have caused the changes in the financial results when compared to the three and nine month
periods ended March 31, 2006. During the three and nine months ended March 31, 2007, the Company
continued to evaluate its Mareesburg and Spitzkop properties.
For the three months ended March 31, 2007, PGM production/sales were 26,807 ounces (75,540 for the
nine months ended March 31, 2007 and nil for the three and nine months ended March 31, 2006).
For the three months ended March 31, 2007, Adjusted Net Income was $8.9 million with a reported net
loss of $(11.2 million) as a result of accounting for $14.2 million of stock based compensation and
the recording of a foreign exchange loss of $1.6 million in the quarter (Adjusted Net Income of $18.5
million with a reported net loss of $(6.3 million) for the nine months ended March 31, 2007 and
Adjusted Net Income of $(0.6 million) with a net loss of $(1.1 million) for the three months and
Adjusted Net Income of $(1.8 million) with a net loss of $(1.5 million) for the nine months ended
March 31, 2006).
Metal Prices
As depicted below the market prices of three of the PGM elements that significantly impact the
Company's revenues (platinum, rhodium and palladium) have experienced volatility over the last five
quarters (Source: Johnson Matthey, www.platinum.matthey.com).
To view graphs please click on the following link: http://www.ccnmatthews.com/docs/ELR0514.pdf
Currency Exchange Rates
As approximately 90% of the Company's production and development costs are denominated in South
African Rand ("ZAR") and 100% of the production revenue being US dollar based (on a Canadian GAAP
reporting basis) the Company is exposed to fluctuations in both Canadian and US exchange rates. As the
Company does not hedge any transactions, it is inherently exposed to the fluctuations of both the US
dollar and the ZAR over the reporting quarter (and remains exposed to future fluctuations in currency
exchange rates to the ZAR).
Foreign currency denominated monetary assets and liabilities are translated at the period-end exchange
rate. Gains and losses arising from foreign currency translation are recognized in the statement of
operations and deficit. Translation gains or losses on the consolidation of the financial statements
of self-sustaining operations are accumulated in the currency translation account ("CTA") on the
consolidated balance sheet. Translation adjustments arise as a result of fluctuations in foreign
currency exchange rates. The currency translation adjustment for this quarter was caused by a 2%
strengthening of the ZAR to the Canadian dollar, and the adjustment of $11.0 million ($11.0 million
for the nine months ended March 31, 2007) recorded in the CTA is a result of translating the Barplats
financial statements.
Operating Results
These financial statements present a measure of historical information that differentiates between
operating and development costs. Operating results are affected by exchange rate fluctuations to the
ZAR and the US Dollar and these exchange fluctuations are reflected in the current financial results.
During the quarter the Company experienced a 21% increase in the realized revenue per ounce (net of
associated smelter costs) to $1,323/ounce from $1,096/ounce in the previous quarter due to an increase
in all PGM pricing when compared to the previous quarter. Fully burdened production costs (mining,
concentrating and associated support expenses) have increased over the period on a per ounce basis to
approximately $884/ounce (previous quarter $755/ounce). The increase was caused in large part by an
industrial action at one of the sections at CRM that occurred at the beginning of the quarter,
resulting in the dismissal of 305 employees. This industrial action and management's response to
minimize the interruption to CRM's productivity had a negative impact on production volumes and costs
as the Company began hiring/training of additional contract staff and the purchase of third party ore
to maintain milling levels.
Additionally the portion of ore reserve development expensed in the quarter increased significantly to
2,357 metres (previous quarter 1,586 meters). This increase is in line with the Company's decision to
accelerate mine development in order to build a production profile at CRM of 160,000 tonnes per month
and to ensure 18 to 24 month reserve availability.
The combined impact of steps taken by management to minimize the disruption of CRM's production
volumes and the costs associated with the accelerated reserve development, was estimated at $240/ounce
in the quarter, which when applied against actual costs for the quarter, would have resulted in a
total production cost of $640/ounce.
The average total mining rate during the third quarter of fiscal 2007 continued at 70,000 tonnes per
month (nine month average 68,500 tonnes per month) at an average PGM grade of 4.02 g/t (5PGE+Au).
Underground development increased to 3,687 metres during the quarter (previous quarter 2,438 metres)
which is integral in generating additional mineable reserves which in turn allows for continued
production build up.
There was no revenue generated from Mareesburg, Spitzkop or Kennedy's Vale properties during the
quarter.
Other Costs and Expenses
Amortization
The depreciation and amortization due to Barplats' activities for the current quarter is $3.1 million
($9.6 million for the nine months ended March 31, 2007) based upon the fair value allocation to these
assets.
Non-Controlling Interest
Non-controlling interest during the quarter was $1.6 million ($3.0 million for the nine months ended
March 31, 2007) due to Barplats' non-controlling shareholders.
Corporate Administration
The general and administrative expenses for the current quarter were $4.2 million ($12.4 million for
the nine months ended March 31, 2007). Included within these balances are costs associated with
managing the South African operations and severance paid to a past director and officer of the Company
in the first quarter.
Stock-Based Compensation
In the current quarter the Company expensed $14.2 million ($14.5 million for the nine months ended
March 31, 2007) in share based compensation. The value of the options has been calculated using the
Black-Scholes option-pricing model.
Interest Income
Interest income recorded during the current quarter totaled $0.1 million ($3.9 million for the nine
months ended March 31, 2007). Reported interest income in the quarter was affected by a non-cash IFRS
accounting entry booked by Barplats to adjust year to date balances. Interest continued to accrue on
bank and short-term investment balances as well as the loan to Gubevu Consortium Holdings (Pty)
Limited ("Gubevu").
Interest Expense
During the quarter the Company paid and accrued interest on Barplats' outstanding debt as agreed at
the time of acquisition. Portions of this debt are still outstanding and interest continues to accrue.
Development Activity
Management continued to evaluate development priorities on a continuous basis in the third quarter.
CRM
Design for the Crocette mining section has been finalized and the environmental impact study has been
submitted to the DME for approval.
At Kareespruit the previously announced drilling programme has commenced and during the quarter 4,318
meters were drilled (previous quarter nil meters and for the nine months ended March 31, 2007 4,318
metres). Four holes including deflections are complete and there are three in progress. Assay results
will be reported when available.
Kennedy's Vale
A study has been commissioned to establish the cost of re-opening one of the vertical shafts in order
to gain access for trial mining in order to fully evaluate the economic potential of the project.
The final re-interpretation of the seismic study has been received and provides greatly improved
definition over previous work.
Spitzkop
During the quarter 2,514 metres (previous quarter 11,262 meters) were drilled on Spitzkop bringing the
entire drilling program to completion with 26,806 metres drilled. Holes were located to evaluate the
UG2 reef along the orientation to the proposed decline position and to assess the shallow Merensky
potential. Assay results received to date have been reported and the results are consistent with
previous announcements on the project and further results will be published once all the data has been
compiled.
Work on a feasibility study has commenced and metallurgical test work is in progress.
Mareesburg
Work on the application for a New Order Mining Right has commenced. This application will be submitted
in the next quarter.
Geological work has taken place to consolidate the information made available from the data exchange
with Sylvania Resources who have the prospecting right to the adjacent Vygenhoek (Everest North)
property.
/T/
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Eastern Platinum Limited Summary of Mineral Resources
Mineral Resource - UG2
----------------------
Crocodile River Mine Tonnes ('000) 3PGE+Au (g/t) 3PGE+Au (000oz)
Measured 6,894 4.19 928
Indicated 30,324 4.41 4,303
Inferred 52,482 4.41 7,449
Kennedy's Vale Tonnes ('000) 5PGE+Au (g/t) 5PGE+Au (000oz)
Indicated 152,100 5.41 26,475
Inferred 70,000 6.17 13,880
Spitzkop Project Tonnes ('000) 5PGE+Au (g/t) 5PGE+Au (000oz)
Measured 37,460 7.70 9,270
Mareesburg Project Tonnes ('000) 3PGE+Au (g/t) 3PGE+Au (000oz)
Measured 8,757 5.38 1,515
Indicated 6,737 2.31 501
--------------------------------------------------------------------------
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Mineral Resource - Merensky
--------------------------
Spitzkop Project Tonnes ('000) 5PGE+Au (g/t) 5PGE+Au (000oz)
Indicated 47,380 2.43 3,710
--------------------------------------------------------------------------
/T/
Investing Activity
During the quarter the Company invested $20.2 million in capital at Barplats and purchased the net
smelter rights from Rhodium Reefs Royalties for $7.6 million (US$6.5 million) in cash and 12 million
common shares of the Company. For the nine months ended March 31, 2007 the Company has invested $89.8
million in new capital at Barplats and in strategic business opportunities.
Liquidity and Capital Resources
As at March 31, 2007, the Company's working capital position was $60.7 million (previous quarter $78.8
million) and its cash and cash equivalents and short-term investments totaled $58.4 million (previous
quarter $70.7 million). The decrease in the cash balances from previous quarter is due in part to
exploration expenditures including associated property, plant and equipment totaling $20.2 million
(previous quarter $15.8 million) and the purchase of net smelter rights for US6.5 million.
May 11, 2007, the Company completed and announced that its underwriting agreement with a syndicate of
underwriters to sell 92,105,300 common shares at a price of $1.90 per share to raise gross proceeds of
$175 million pursuant to a short form prospectus was fully subscribed for and the agents had exercised
their full over allotment option for the sale of an additional 13,815,795 common shares in the Company
resulting in aggregate gross proceeds of $201,250,086.
Certain statements included herein constitute "forward-looking statements" within the meaning of
applicable Canadian securities legislation. These forward-looking statements are based on certain
assumptions by Eastplats and Barplats and as such are not a guarantee of future performance. Actual
results could differ materially from those expressed or implied in such forward-looking statements due
to factors such as general economic and market conditions, increased costs of production and a decline
in metal prices. Eastplats is under no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, except as required by applicable
laws.
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Eastern Platinum Limited
Mr. Ian Rozier, M.Sc., P. Eng.
President & CEO
(604) 685-6851
(604) 685-6493 (FAX)
Email: info@eastplats.com
Website: www.eastplats.com
OR
NOMAD - Canaccord Adams Limited
Robin Birchall
+44 20 7050 6752
Email: Robin.Birchall@CanaccordAdams.com
OR
NOMAD - Canaccord Adams Limited
Clayton Bush
+44 20 7050 6752
Email: Clayton.Bush@CanaccordAdams.com
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