-- Aquarius Platinum puts Everest mine "on care and
maintenance"
-- Move comes just weeks after company halted Marikana mine
-- Producer under pressure from low metal prices
-- Analysts say more platinum mine closures needed to influence
price
(Adds details and context throughout.)
By Devon Maylie and Rhiannon Hoyle
SYDNEY--Aquarius Platinum Ltd. (AQP.AU) halted its second mine
in a month Thursday, on account of low prices, a signal that miners
of the precious metal will continue to struggle to remain
profitable amid weakening demand and rising costs.
The move to place South Africa's Everest mine "on care and
maintenance" from close of business Thursday comes less than two
weeks after Aquarius stopped operations at its Marikana mine,
jointly run with Anglo American Platinum Ltd. (AMS.JO), citing
sustained weak platinum group metal prices.
"[Platinum] prices in both rand and U.S. dollar terms are likely
to remain stagnant for some time, and margins will remain under
severe pressure across the industry," Aquarius said in a
statement.
Analysts at JP Morgan said larger platinum mines would have to
close to influence the price of the metal, which is scarcer and
more expensive to extract than gold and traditionally trades at a
higher price. But weak industrial demand--platinum is primarily
used in cars to clean emissions--and worries that the euro-zone
debt crisis will sap global growth, have pressured platinum below
the price of gold and below the cost of production for a growing
segment of the industry.
Adding to demand concerns, Aquarius said the South African
sector--the world's largest producer of platinum--is being hit by
costs that are up more than the rate of domestic inflation, and
increased labor disruptions that are causing output losses.
That isn't good news for the South African economy, which partly
relies on mining exports and is projected to grow slower than last
year.
South Africa's mining sector contracted 16.8% in the first three
months of 2012 due to worker strikes at platinum mines, safety
stoppages at gold mines and slower demand from Asia, the country's
reserve bank said. The sector dragged down overall gross domestic
product growth by 0.9% on the quarter.
Many platinum miners face a dismal outlook. The largest
producer, Anglo American Platinum Ltd. (AMS.JO), has already cut
capital spending plans at its South African mines, saying it wants
to prioritize less capital-intensive projects in the near term
given pricing volatility and escalating costs. Its parent, Anglo
American PLC (AAL.LN), is reviewing its operations and could sell
or halt of some of its unprofitable mines.
Eastern Platinum Ltd. (ELR.T), said recently it was suspending
some work at its South African mines and reviewing its
spending.
"Aquarius now has two of its seven mines operating, but
crucially we estimate the residual company is now cash break-even,
something none of its competitors Lonmin PLC (LMI.LN), Northam
Platinum (NHM.JO), Impala or Amplats can boast," said Liberum
Capital analyst Dominic O'Kane in a note.
The spot price of platinum Thursday traded around $1,456 a troy
ounce, down 16% from its 2012 high of $1,734/oz recorded in
February.
Metals consultancy Thomson Reuters GFMS estimates that the
platinum market will be over-supplied by 735,000 ounces this year,
while Johnson Matthey said the 2012 surplus will be similar to last
year's--which was 430,000 ounces.
At 1126 GMT, Aquarius shares were trading down 10.69% at 7.10
rand.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com and Devon
Maylie at devon.maylie@dowjones.com
