AQUARIUS Platinum expected a cash foreign exchange loss of about $25 million (R221m) following its decision to close the currency hedge covering its potential acquisition of Northam Platinum’s Booysendal South assets in North West
, the company said in an operational update yesterday.
The expected loss weighed on its share price, which dropped 1.42 percent to R6.24 on the JSE yesterday.
Aquarius, which reported a 29 percent drop in revenue to $486m for the year to June, and a $154m headline loss compared with headline earnings of $143m in the previous year, said the acquisition was subject to regulatory approval.
The R1.2bn deal required written consent from Mineral Resources Minister Susan Shabangu to adjust the Everest mine converted mining right to include Booysendal South by March next year.
Aquarius, which is listed in London, Sydney and Johannesburg, said that as part of the purchase agreement a $15m deposit had been placed in an escrow account, which was not included in its balance sheet.
The Aquarius board had initially decided to enter into a foreign currency contract to fix the exchange rate covering the potential R1.2bn purchase consideration, given that Aquarius retained its treasury in dollars.
In a statement, the company said the board was considering the manner in which the firm would fulfil its obligations under the purchase agreement in the event of the remaining conditions being fulfilled before the purchase agreement lapsed, on April 28 next year.
It had concluded that given the manner in which Aquarius was likely to finance the purchase obligation, retaining the foreign currency contract was no longer required.
“In view of this, the board has resolved to close out its currency contract and expects to record a cash foreign exchange loss in the vicinity of $25m,” the statement read.
Aquarius has been hard hit by the wave of challenges in the platinum sector.
Due to labour unrest, rising costs and low demand for the precious metal, the company idled its Everest mine as well as its Marikana operation, which is a 50/50 venture with Anglo American Platinum, in June.
The cost of placing the mines on care and maintenance was between $8.5m and $9m, of which about $4m remained outstanding, Aquarius said yesterday.
In its operational update, Aquarius said industrial relations had improved since the end of the quarter to September, allowing the company to continue the rollout of its initiatives to improve productivity at the Kroondal mine. The expansion of the K6 shaft remained on budget and on time.
“It is positive for the company, it has done a good job. Kroondal has suffered a lot this year and we are expecting a better third quarter,” an industry analyst said.