business model

Aquarius Platinum has been uniquely successful in bringing into operation small, shallow, relatively low-grade PGM deposits using innovative technologies and mining methodologies. The Company has developed a clear set of differentiators which give it a significant competitive advantage over larger conventional PGM producers which historically have tended to exploit the deeper, more capital-and labour-intensive PGM deposits in South Africa.

Aquarius’ fundamental differentiators include:

• Mechanised mining techniques, which are capital rather than labour intensive and bring with them a higher degree of safety, lower power requirements and other innovations in design, mining and processing which are now being emulated by some of the larger industry players.
• Mining of shallow PGM deposits via decline shafts which require a fraction of the capital cost of more conventional vertical shafts.
• Contract mining and processing, which brings with it "bought-in" expertise and resources, training capability and procurement power, allowing for a leaner and more cost-effective structure and greater flexibility.
• Selling concentrate directly to two customers on life-of-mine contracts, thereby eliminating the significant financial and technical risks associated with the setting up and running of smelting and refining facilities, and the need for marketing infrastructure.
• Low overhead structure, from exploration to operations, management and corporate financing.
• Access to international capital markets through its listings on the ASX, LSE JSE and Level 1 ADR in the US.

strategy

Aquarius has identified several strategic imperatives to facilitate the delivery of shareholder value in the face of uncertain short-term market conditions and a challenging operating environment. These are:

• To optimise costs and efficiencies at existing operations in order to improve or at least maintain the position of these mines on the cost curve.
• To seek growth through organic expansion or the acquisition of PGM properties which are:
  • Contiguous with existing operations and capable of exploitation through existing infrastructure at low capital cost.
  • Relatively shallow, primarily UG2 orebodies which lend themselves to the Group’s established mechanised mining techniques.
• To steadily grow production from current levels to the extent that it can be done profitably, while not hesitating to cut loss making production.
• To evaluate the acquisition of other PGM companies with caution, in terms of earnings accretion rather than potential increases in production.
• To remain a focused primary PGM producer, with a continued focus on southern Africa.

Aquarius is committed to functioning as efficiently as possible, containing costs and maximising profit for the benefit of its shareholders while always remaining mindful of its stakeholders, including employees, the communities surrounding its operations, business partners and suppliers.

Of paramount importance is the commitment to conduct our business safely, to cause ‘zero harm’, to respect the communities in and around our operations, to rehabilitate the land on which we have mined and to interact with the relevant stakeholders with respect.

Growth opportunities will continue to be judged in terms of their potential capital efficiency and ability to generate growth in value versus their contribution to growth in production, and the potential growth in free cash flow per share. The Company will continue to manage its cash resources carefully during the coming years. This strategy has been implemented effectively in the 2011 financial year, during which Aquarius acquired Afarak Platinum and the Buttonshope (Booysendal South) property. These are properties of strategic importance to Aquarius’ existing operations, and have together increased the Group’s resources by almost 23% at a cost of less than $300 million. They will be instrumental in increasing the longevity of Aquarius’ Kroondal, Marikana and Everest mining operations, and the creation of future shareholder value.

Industry history and context – supply constraints