After enduring a slump in prices for platinum group metals (PGM), together with persistent industrial unrest in South Africa, Aquarius Platinum's (AQP) half-year report doesn’t point to any significant near-term recovery, although the market responded positively, driving-up Aquarius' share price sharply.
Aquarius' attributable first-half production fell by 27 per cent on 2011 to 156,787 PGM ounces, though this was due to the suspension of operations at the Marikana and Everest mines. The fall-away in output - combined with a 10 per cent contraction in US$/PGM prices - meant that mine cash-profits fell by 24 per cent to $22m (£14m). However, Aquarius recorded a 62 per cent increase in its first-half net loss to $184m after it booked an impairment charge of $127m on the carrying value of Marikana and other non-operating assets, together with $17m for the transition costs at Kroondal and elsewhere. More worryingly, net debt increased substantially, as Aquarius reversed into negative net operating cash-flow of $38m, against an inflow of $25m in 2011.
Supply in PGM should grow tighter this year, particularly if Implats goes ahead with planned cut-backs to capacity. Nevertheless, there’s no guarantee that PGM prices will benefit as European industrial demand remains subdued, inventories remain high, and recycling rates increase.
Broker Citi values Aquarius at 92p per share on a discounted cash-flow model, assuming a discount rate of 9 per cent for its UK listing.
| AQUARIUS PLATINUM (AQP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 71p | MARKET VALUE: | £346m | |
| TOUCH: | 70-71p | 12-MONTH HIGH: | 171p | Low: 33p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 96¢ | NET DEBT: | 45% | |
| Half-year to 31 December | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 252 | -136 | -24.3 | nil |
| 2012 | 179 | -193 | -38.6 | nil |
| % change | -29 | - | - | - |
£1 = $1.57 | ||||
