Johannesburg - Aquarius Platinum reported a 24 percent drop in core profit for the first half, but said it was able to bring down costs by about a third, sending the miner's shares up as much as 10 percent.

Aquarius, the world's fourth largest platinum producer, said profitability at its mines was $22 million for the six months ended Dec. 31, compared with $29 million a year earlier, due to tough operating conditions at its South Africa mines and lower platinum prices.

Mining companies have struggled to maintain profitability as costs rise, while platinum prices remain subdued due to reduced demand from carmakers, the leading consumers of the white metal used in catalytic converters.

“... The continued depressed demand from European auto producers and the substantial above-ground inventories renders significant further short-term price increases unlikely,” Chief Executive Jean Nel said in a statement.

Aquarius said the total cash cost of production was $156 million in the first half, down $80 million from a year earlier, due to lower production following the closure of its high-cost mines Marikana and Everest last year.

The lower costs helped more than double its gross cash margin to 13 percent from 6 percent.

Aquarius, however, added that despite operational improvements, cash generation at current spot prices remained constrained.

The mining industry in South Africa, the source of between three-quarters and four-fifths of the world's platinum, was hit by a wave of strikes last year, some of which were accompanied by deadly violence.

Soaring costs, labour unrest and falling production have resulted in the closure of some mines, with more expected to follow suit.

“The operations are tightened up and running efficiently and, should the auto cycle keep improving in the years ahead, Aquarius will be able to consider re-opening mines,” Citigroup analyst Jon Bergtheil said in a note to clients.

Total production fell 20 percent to 308,954 ounces in the first half.

Shares of Aquarius were up 2 percent at 69.75 pence at 12:00 SA time on Friday on the London Stock Exchange. Its Australia-listed shares closed at A$1.075. - Reuters