Johannesburg - Despite Aquarius Platinum’s decision to unbundle non-core assets, it is not out of the woods yet as it may have to raise $250 million (R2.8 billion) in debt to repay a convertible bond that it will not be able to pay down from cash flows, according to a note from Investec.
The JSE- and Australian Stock Exchange-listed firm announced yesterday that it was hiving off its Blue Ridge platinum mine, the Sheba’s Ridge mine and Kruidfontein mining right for $67m.
“The sale of these assets won’t mean that the company can afford to pay its debt, but the proceeds could certainly be a big help,” Investec wrote in an e-mail to clients.
The Aquarius shares rose 5.6 percent on the JSE yesterday, after it announced the sale of the non-core assets. It closed 1.23 percent higher at R7.38.
Aquarius has placed three operations, including Blue Ridge in Mpumalanga, on care and maintenance since 2011, when the mining sector was grappling with the challenging economic environment.
Yesterday it said it had agreed to dispose of all the shares held in its indirect subsidiary, C&L Mining and Resources, to Pilanesberg Platinum Mines for $30m.
C&L Mining and Resources’s major asset is the Kruidfontein prospecting right.
The sale is conditional on the renewal of the prospecting right and regulatory approval. The company will receive $16.2m (before tax) in consideration for its economic interest in the prospecting right with the remaining $10.8m (before tax) due to the original vendors of the right.
The company will sell its Blue Ridge and Sheba’s Ridge platinum mines to a consortium led by the China National Arts & Crafts Group for $37m in cash.
Of the $37m, $4.3m would be lent and advanced by Ridge Mining to Blue Ridge for a period of two years from the closing date, the company said.
The sale agreement is subject to approvals from the Chinese government and the Competition Commission, as well as a number of Department of Mineral Resources regulatory approvals.
The date for the fulfilment of the conditions was June 30, but this might be extended if required, by agreement between the parties, the company said.
Revenue at Kroondal decreased 6 percent quarter on quarter to R1.03 billion in the quarter to December due to a negative sales adjustment of R72.4m because of the lower metal prices. Output was down 9 percent year on year.
The company has been hit by increasing input costs and low commodity prices that have resulted in profit losses.
The company operates the Kroondal mine in North West and the Mimosa mine in Zimbabwe, which it runs jointly with Impala Platinum. – Additional reporting by Bloomberg