What’s new
■ Everest mine re-opened
■ Blue Ridge mine plan under review
■ Hefty exceptional costs
Full-year figures from Aquarius Platinum revealed a difficult period for the group, with production challenges compounded by industrial action. Total attributable production of platinum group metals (PGMs) decreased to 422,645 ounces in the year to end-June from 455,740 ounces in the prior year, largely reflecting the closure of the Everest mine, which finally re-opened in the final quarter and is expected to ramp-up rapidly in 2011. Kroondal and Marikana both produced less than in the prior year due to a two-week strike, while Mimosa produced more. Aquarius has instigated a review of the long-term mine plan for Blue Ridge to enhance production and improve operational flexibility and costs.
Revenue increased 52 per cent to $472m (£302m) in the year and net profit increased by $73.5m to $27.8m. These improvements - despite lower production and $34.3m of exceptional charges - reflect higher and less volatile PGM prices. Platinum rose 30 per cent over the year but peaked in April and underperformed other PGMs (notably palladium and rhodium) due to its reliance on European demand for diesel cars. A final 4¢ a share dividend takes the full-year payout to 6¢ (2009: nil).
Evolution Securities says...
Reduce. Net attributable earnings came in slightly below our estimates. We have revisited our relative valuation model and have now lowered our target price to 230p as we believe the near to medium term outlook for the platinum industry is tough. The April to June quarter was a good one for the platinum miners but, in the calendar third quarter to date, platinum prices were an average of $100/oz lower than the average for second quarter. To add to the platinum miners’ woes, the rand has further strengthened and this is likely to result in continued cost pressures during the year ahead. .
Bank of America Merrill Lynch says...
Buy. We have cut our net present value estimate by 10 per cent and downgraded our price objective by 9 per cent to 450p. Our revised model fully incorporates the bad newsflow reported over the past few weeks and which has dragged the stock down. Aquarius' shares now trade at a price to net present value multiple of 1.4 times and on 10 times 2011's expected earnings, compared to rating of 20 times for Lonmin. We still see value in the name and maintain our buy stance. Expect EPS of 33¢ for 2011 (14¢: 2010).
