Andre Janse van Vuuren

Bondholders of Aquarius Platinum are signalling support for the mining company’s turnaround, sending yields down more than half since an April debt buyback even as wage talks with its biggest South African union drag on.

The yield on the company’s convertible dollar notes due in December 2015 was 6.81 percent on Tuesday, down 8.72 percentage points from April 7 when Aquarius said it would sell shares and bought back 58 percent of almost $300 million (R3.2 billion) in notes outstanding. The average dollar yield on emerging market metals and mining companies fell 44 basis in the period to 5.82 percent, JPMorgan Chase indices show.

Aquarius, with all but one of its platinum assets in South Africa, sold shares to finance the $173m bond purchase as the company has struggled to raise cash after shutting three of its mines since 2011.

The National Union of Mineworkers (NUM), the largest union at its Kroondal venture with Anglo American Platinum, has been operating without a wage agreement since June 30.

“They’ve done the financial restructuring and they’ve got some cash in the bank,” said Michael Kavanagh, a metals and mining analyst at Noah Capital Markets in Cape Town, on Tuesday. “I would be surprised if there’s a problem to pay back the bonds. Those things stack up and will put them in a good position to meet all their obligations.”

Aquarius raised about $230m in the share sale, $57m more than what bondholders tendered for repurchase. It would retain the balance to improve liquidity and help buy the rest of the debt when it became due next year, the company said on April 15.

It set the initial price to convert the bonds into equity at $6.773 a share in November 2009. The shares fell 0.22 percent to close at R4.45 yesterday.

Talks between Aquarius and the NUM, which started in May, were continuing, Sydwell Dokolwana, the union’s Rustenburg regional secretary, said on Tuesday.

“Historically, they’ve had a good relationship with their workforce and everybody understands that no one wins from a strike,” Kavanagh said. “If there’s going to be a strike at Aquarius, it will be quite a surprise.”

The NUM lost its status as the biggest representative of employees to the Association of Mineworkers and Construction (Amcu) at Anglo Platinum, Impala Platinum and Lonmin. Amcu ended a five-month pay strike at the three companies in June, costing workers more than R10bn in lost wages.

The deal, which provides for increases in basic pay of as much as 20 percent, could make other unions more resolute over demands, Andrew Levy, a top labour relations consultant, said on June 25.

Charmane Russell, a spokeswoman for Aquarius, declined to comment on Tuesday.

Aquarius, along with Impala, owns the Mimosa platinum mine in Zimbabwe, whose government has ordered all foreign-owned companies to cede a majority stake to local blacks.

Aquarius’s prospects might still be hampered if it was forced to sell more than half of its stake in Mimosa, the company’s second-biggest operation, said Edward Sterck, an analyst at Bank of Montreal.

It was “still not clear” how this would pan out.

Platinum has risen 9.4 percent this year. – Bloomberg