Royal Bafokeng Platinum and Aquarius Platinum yesterday announced huge curtailments of their platinum operations as the sector battles high costs, labour unrest, stagnant prices and an oversupplied market.
Analysts estimate 40%-50% of platinum output in SA is being produced at a loss.
Aquarius has put a second mine, its Everest operation, on care and maintenance - and now only two of its seven mines in SA and Zimbabwe are operating. Earlier this month it suspended operations at the Marikana mine it shares with Anglo American Platinum, near Rustenburg.
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"The ramp-up at Everest has encountered challenges resulting from poor ground conditions and ongoing disruptive industrial relations over an extended period and these issues, coupled with the present low PGM (platinum group metal) price environment, have rendered the mine uneconomic," Aquarius announced yesterday. It envisaged no further closures.
While it was relatively easy to place workers from Marikana in other positions, it would be "considerably more difficult" to find work opportunities for Everest’s 1600 workers, Aquarius spokesman Gavin Mackay said.
The platinum market had an "abiding surplus" of about 500 000oz because of the European economic crisis, he said.
Aquarius shares closed 11,95% down at R7 yesterday.
The shares have fallen 62% so far this year.
"Aquarius now has two of its seven mines operating, but crucially, we estimate the residual company is now cash break-even, something none of its competitors - Lonmin , Northam , Impala or Amplats - can boast," Dominic O’Kane, an analyst with Liberum Capital, said yesterday.
While all platinum producers in SA were struggling, the larger groups had long-life mines at the core of their portfolios and should perform "acceptably in a difficult environment", Citi Metals and Mining said yesterday.
Aquarius has an agreement with Northam to buy the Booysendal South property next to its Everest mine, on the eastern limb of the Bushveld igneous complex, for $130-million in the last quarter, but Mr O’Kane said given the sharp fall in its share price and a $300-million convertible note due in 2015, it may not conclude the deal.
Liberum estimated Aquarius had cash of $164-million after paying about $31-million to suspend the Marikana and Everest mines.
But Mr Mackay said Aquarius would deal with its settlement obligations for Booysendal South.
Royal Bafokeng said yesterday it was conducting a strategic review of its operations and had decided to defer several mine upgrades and expansions. It believes the weak market will prevail for the rest of the year into next and is trying to preserve cash flows.
Royal Bafokeng has deferred a R71,7-million spend on exploration at Styldrift II, and drilling at its Bafokeng Rasemone platinum mine.
It has also postponed building a chair lift at Rasemone, which it estimates will defer R90,7-million.
Its plans to spend R300-million on upgrading a concentrator at the mine have also been deferred.
"We are being proactive on how we deal with the current crisis in the platinum sector, by deferring spending on projects that were earmarked by the company in the short term," Lindiwe Montshiwagae, head of investor relations, said yesterday.