Eastplats Suspends Funding For The Mareesburg/KV ProjectMay 30, 2012
Eastern Platinum Limited (“Eastplats” or the “Company”) reports that due to the continuing negative changes in the global economic environment and the operating environment in South Africa, it has decided to suspend funding for the ongoing development of the Mareesburg open pit mine and construction of the Kennedy’s Vale Concentrator Plant (the “Project”). The Company will reassess the project economics as and when a sustained recovery in the global economic environment and metals prices takes place.
The Project was progressing according to the planned schedule and budget with initial commissioning planned for the first quarter of 2013. Civil works are largely complete and concrete work is well advanced. Almost all the necessary process equipment has been procured and received. Engineering is over 90% complete with construction about 20% complete. The overall project is 30% complete and a rapid restart of project construction could take place when conditions warrant.
The pricing of PGMs has declined significantly since the decision was made to develop the project nine months ago, with little or no fundamental demand recovery or supply reduction forecast in the near to medium term. With the ongoing weakness and volatility in the global financial markets (particularly in Europe which consumes approximately 50% of South Africa’s platinum production), the Company is of the view that a near term recovery in PGM prices to sustainably appropriate levels is unlikely. In addition, the South African PGM industry is dealing with a number of other predominating economic factors, including unrelenting operating cost inflation, adverse currency exchange rates, weak chrome prices, heightened concerns with respect to reliable power delivery and unplanned and unlawful labour actions.
In the current operating environment, the financial risk of continued project development is not merited and Eastplats has taken the decision to suspend the Project funding so as to maintain the value in the resources planned to be mined. The Project will be monitored subject to a sustainable strengthening of metal prices and improvement in operating conditions in South Africa.
“These factors, and particularly the continued cost pressures that we are experiencing in South Africa, make the platinum sector an extremely difficult space in which to operate. We do not envisage any significant large scale production cuts from the larger producers and consequently expect that the industry will have to contend with much lower metal prices than previously projected in the medium term. As the open pit operation at Mareesburg was previously projected to provide a significant contribution to revenue in the near term, we see no merit in depleting the deposit and the financial resources of the Company until such time as economic and operating conditions markedly improve. After a considerable amount of review and evaluation Eastplats has been proactive in taking this action in the interests of maximizing the value of the PGM resources in the Company”, stated Ian Rozier, President and CEO.
The Company continues to review its overall mining operations at CRM in order to mitigate the impact of depressed prices and to safeguard its business and cash resources. As mentioned in the Company’s first quarter financial statements, the performance of the mining contractor, JIC Mining Services, at the Maroelabult section of CRM, is also being reviewed.
The qualified person having reviewed the operating disclosures presented in this press release is Mr. Brian Montpellier, P.Eng.
Total shares issued and outstanding: 928,187,807
Canaccord Genuity Limited, London
Tel: +44 (0) 207 7523 8000
PSG Capital (Pty) Limited
Tel: +27 21 887 9602
No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.
Cautionary Statement on Forward-Looking Information
This press release, which contains certain forward-looking statements, is intended to provide readers with a reasonable basis for assessing the financial performance of the Company. All statements, other than statements of historical fact, are forward-looking statements. The words “believe”, “expect”, “anticipate”, “contemplate”, “target”, “plan”, “intends”, “continue”, “budget”, “estimate”, “may”, “will”, “schedule” and similar expressions identify forward looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to, fluctuations in the currency markets such as Canadian dollar, South African Rand and U.S. dollar, fluctuations in the prices of PGM and other commodities, changes in government legislation, taxation, controls, regulations and political or economic developments in Canada, the United States, South Africa, or Barbados or other countries in which the Company carries or may carry on business in the future, risks associated with mining or development activities, the speculative nature of exploration and development, including the risk of obtaining necessary licenses and permits, and quantities or grades of reserves. Many of these uncertainties and contingencies can affect the Company’s actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Company. Readers are cautioned that forward-looking statements are not guarantees of future performance. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those acknowledged in such statements. Specific reference is made to the Company's most recent Annual Information Form on file with Canadian provincial securities regulatory authorities for a discussion of some of the factors underlying forward-looking statements.
The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except to the extent required by applicable laws.