Company Note 8 March 2007 Metals & Mining

Aquarius Platinum
Going platinum
Aquarius Platinum has grown quickly to become the fifth largest platinum producer in the world. The company has four operations in South Africa and one in Zimbabwe and expects attributable production to grow by over 50% in the next three years. With metal prices expected to remain above long-term historic averages, Aquarius should generate substantial cash flows enabling the company to make acquisitions, or become a significant dividend payer. As we believe that the group’s expansion prospects are not fully reflected in the current share price, we initiate coverage with a Buy recommendation. Thanks to record platinum group metal output of 277,156oz and strong metal prices, Aquarius has seen half-year profits to December 2006 triple to US$85.4m, all but equalling the profit for the full financial year 2006. We expect the strong financial performance to continue through the second half of FY2007 and for FY2008 to bring further record earnings as production increases. Aquarius is well underway with its aggressive growth strategy at its existing operations. This will see attributable production rise by 57% to just over 700,000oz of platinum, palladium, rhodium and gold in the next three years. The company has reiterated its ongoing efforts to identify a suitable acquisition target, but opportunities within the South African platinum sector are limited and expensive. However, ongoing strong metal prices are changing the perspective on the value of these opportunities. If a suitable target can not be identified, the company has pledged to return excess cash to shareholders. We believe that the shares still have considerable upside potential despite the marked rise in recent months, coinciding with strong half-year numbers. We have valued the company using both our long-term forecasts for metal prices and the current spot prices. Overall, our valuations range between £14.29 and £21.17/share. From this range, we take £17.86/share as our target price. BUY.

BUY 1465p

No of shares (m) Market cap (£m) Net cash (£m) Enterprise value (£m) (%) FTA relative 1m +6.4 3m +28.5

84.57 1,239.0 54.13 1,184.87 12m +102.7

12 month high/low (p) Next news Q3 FY2007 production results


Business Platinum mining in Southern Africa Price and price relative (2y)
AQUAR IUS P L AT NUM I 1600 8/3/07









Source : Datastream

Year end 30 June

Sales (US$m)

Pre-tax (US$m)

Normalised net (US$m)


PER (x)


Yield (%)

EV/Sales (x)


2006A 2007E 2008E

431.5 648.6 751.0

192.1 349.1 437.3

85.6 143.0 186.0

100.9 169.0 219.7

26.9 16.1 12.4

24.0 59.1 109.9

0.9 2.2 4.0

5.1 3.4 2.9

9.5 5.6 4.6

Source: Seymour Pierce Limited full year forecasts

Contacts Charles Kernot Research Analyst 020 7107 8069

Asa Bridle Research Analyst 020 7107 8034

Aquarius Platinum 8 March 2007


Investment thesis The facts of the case
Overview Valuation Recommendation

3 3
3 3 3

Valuation Valuation
Summary Fundamental valuation Relative valuation Peak valuation

4 4
4 4 6 6

Company strategy Growing production
The strategy

8 8

Operations Where the magic happens
South African production Zimbabwean production

10 10
10 15

The PGM market Where does it all go?
Key drivers in the PGM markets

17 17

Financials Reality check
Production estimates Earnings Cash flow estimates Balance sheet

21 21
21 23 26 27

Seymour Pierce Research


Aquarius Platinum 8 March 2007


The facts of the case
In 2006, Aquarius Platinum (Aquarius) achieved attributable production of the major platinum group elements, platinum, palladium, rhodium and gold (3E PGE + Au) of 448,000oz. An aggressive growth strategy is in place and in the next three years we expect output from its five operations to increase by 57% to just over 700,000oz. Strong demand for PGMs is expected to maintain prices above historic averages in coming years, making Aquarius a significant generator of cash. We value the company at £17.86/share and recommend the stock as a Buy.

Aquarius’ success is the result of its focus on a specific style of mining operations and an intelligent partnering strategy with other major producers.
The company favours smaller, highly mechanised mining opportunities

The company has tended to favour relatively small mines, which allow a high degree of mechanisation. This is in contrast to the traditional, labourintensive mining seen elsewhere in the South African platinum industry. Furthermore, the company has chosen to avoid the substantial financial and technical barriers associated with downstream processing and sales. Partnership agreements have been struck with both Anglo Platinum and Impala Platinum in South Africa, which has resulted in considerable extensions to the life of two of the company’s major operations. In South Africa, full compliance with black economic empowerment requirements of the new Mining Act (2002) has been achieved far in advance of the legislation’s deadlines. Not only is the company benefiting from strong prices for its headline products, the major PGMs and gold, but also for the minor PGMs, such as ruthenium and iridium. The iridium price has risen by 236% since last January, whilst ruthenium has increased ten-fold in the same period. Furthermore, the company has notable exposure to nickel, copper and cobalt which are also found in the orebodies.

Established partnerships with other major producers have extended the lives of operations

BEE compliance achieved

Good exposure to high valued minor PGMs and base metals

We value the company between £14.29/share and £21.17/share

We have valued the company based on both our own, conservative longterm metal price forecasts and current spot prices, and provide a range of valuations, which would apply at differing times in the metal price cycle. We have also compared the company to Lonmin, another London-listed PGM producer with South African operations. We believe the key valuation range lies between £14.29/share and £21.17/share.

We set a target price of £17.86 and recommend a buy

Aquarius has a significant and growing production base in a strong suite of metals. The company is already well on the way to building a substantial treasury for acquisitions, exploration or dividend payment. We value the company at £17.86/share and initiate our coverage with a buy recommendation.


Seymour Pierce Research

Aquarius Platinum 8 March 2007


Aquarius is now a well established and significant PGM producer. The company’s share price has increased substantially in the past twelve months matching developments at its operations and strengthening metal prices. We have applied three methodologies to valuing the company, which involve both fundamental and relative valuation of the producing assets. We have also attempted to highlight the variation in valuation that might be expected during a PGM price cycle. Overall, our valuations for the peak of the cycle range between £14.29/share and £21.17/share. We take the mid-point as our target price at £17.86/share.

Assuming that 2007 will represent the peak of the current cycle, our fundamental valuation implies a target price of £14.28p per share, which represents a premium to the current price. Our relative valuation also implies some upside, whilst our peak valuation, using current spot prices extended over the longer term, gives a cycle peak value of £21.17.

Fundamental valuation
Our fundamental valuation is based on our long term PGM price forecasts…

Our fundamental valuation of Aquarius looks at the value of the company based on long term metrics. PGM prices are a key factor, and in general terms, we expect the major PGM prices to peak in 2007 before easing to the bottom of the current cycle in 2010. Prices should then climb steadily for the remainder of the forecast period as the next cycle begins. More detail of our PGM and base metal price forecasts can be found later in the note, but we regard these estimates as reasonably conservative. Foreign exchange must be regarded as the other key factor for Aquarius, with the majority of costs in South African Rand and Zimbabwean dollars and metal sales in US dollars. South African producers have benefited from a weakening of the rand in recent times, which has lowered costs in relative terms. Our forecasts assume a continuation of this trend over the forecast period. The hyperinflationary environment in Zimbabwe has led to a series of devaluations against the US dollar in recent years. Future, relative movements in the currency are hard to forecast, but we believe costs at the company’s Zimbabwean operations in US dollar terms should be manageable. The matrix below calculates the valuation of Aquarius on a number of different bases – in order to generate indications of its peak, trough and average share prices over the course of a platinum cycle. The multiples are set in line with those exhibited historically. The discounted cash flow and price/book valuations also reflect minimum levels for the shares, in order to reflect takeover potential of the stock. It should be noted that the cash flow model only includes those funds due to Aquarius from its South African subsidiary as governed by its stake in the subsidiary. This is set to change assuming the group’s BEE transaction is completed but, even though ownership of the subsidiary is set to increase, there are likely to be more shares in issue, reducing per share valuations back to current levels.

….and long term Rand-dollar exchange rate assumptions

We offer potential valuations at various points in the metal price cycle

Seymour Pierce Research


Aquarius Platinum 8 March 2007

South African Rand to US$ spot exchange rate

8.5 8 7.5 ZAR: US$ 7 6.5 6 5.5 5 Feb 05 Apr 05

Jun 05 Aug 05 Oct 05 Dec 05 Feb 06 Apr 06

Jun 06 Aug 06 Oct 06 Dec 06 Feb 07

Source: Datastream & South African Reserve Bank

This valuation relates solely to the earnings generating assets of Aquarius, together with its potential for increased production and revenue generation as a consequence of its capital expenditure programme. Development of these assets is reflected through the use of the long-term NPV calculation. Together with the price/book valuation, this also allows for capital costs.
Aquarius Platinum - earnings valuation matrix using forecast metals prices
Valuation summary Value Multiple (US$/share) Weighted value Weight (US$/share)


Peak EPS Peak CFPS Mid-cycle EPS Mid-cycle CFPS Trough EPS Trough CFPS Discounted FCF Price to Book Average per share (US$/£) Peak per share (US$/£) Trough per share (US$/£)
Source: Seymour Pierce Limited

2.20 4.00 1.66 3.14 1.38 2.66 4.83

6 4 18 12 11 7 8.0% 1.4

13.18 16.00 29.92 37.66 15.19 18.59 15.93 6.76 19.15/9.82

10% 10% 15% 15% 10% 10% 20% 10%

1.32 1.60 4.49 5.65 1.52 1.86 3.19 0.68 20.30/10.41 27.84/14.28 12.97/6.65

Valuations lie between £6.65 and £14.28 per share

As the matrix shows, there is a considerable spread in the potential valuation based on the timing in the price cycle, from £6.65 to £14.28 at the current peak. Hence, the calculations imply that the fundamental valuation of the company could more than halve during a cycle trough. Clearly, given the current strong economic backdrop we believe that such a situation is a distant prospect.


Seymour Pierce Research

Aquarius Platinum 8 March 2007

Relative valuation
In comparison with Lonmin, Aquarius looks attractive on a ratio basis. In terms of both production ratios and earnings ratios, the company looks well placed. For example, EV per produced oz is less than half that for Lonmin, whilst EV/EBITDA is 8% lower. It can be argued that Lonmin justifies a premium to Aquarius in that the company produces higher valued refined metals, and not just metal in concentrate. However, the current disparities appear too great, especially given the much lower capital commitment that Aquarius has made to its operations.
Relative valuations of Aquarius and Lonmin
Price (US$) Issued shares (m) Mkt. cap (US$m) Net debt/ (cash) (US$m) EV (US$m) NPV (US$m) Attrib. Pt prod. (000 oz) EV/ NPV EV/ prod oz (US$/oz)


Lonmin Aquarius

57.95 27.13
EV (US$m)

143.1 84.6
Revenue (US$m)

8,293 2,296

273.2 -79.9

8,566 2,216
Recurrent (US$m)

2,775 1,348
EV/Revs (US$m)

659.5 348.8

3.09 1.64

12,989 6,355
PER (x)


Lonmin Aquarius

8,566 2,216

2,297 649

1,381 389

580.6 141.6

507.0 143.0

3.7 3.4

6.2 5.7

14.8 15.6

14.2 16.1

Source: Seymour Pierce Limited

Peak valuation
Fundamental valuation run with current spot prices gives valuations between £14.29 and £21.17/share

Finally, we show our valuation of Aquarius based on our fundamental valuation matrix, but using approximations to the current spot market prices for the PGMs, gold and base metals. The peak (£21.17/share) and average (£14.55/share) cycle prices indicate the potential for a substantial uplift in the share price in the short-term. As with Lonmin we take the average of the peak and central valuations as our target price which we therefore set at £17.86/share.
PGM and gold prices
1,600 1,400 1,200 1,000 4,000 800 3,000 600 400 200 0 Feb 05 Apr 05 Jun 05 Aug 05 Sep 05 Nov 05 Jan 06 Mar 06 May 06 Platinum Palladium Ruthenium Iridium 2,000 7,000


Price (US$/oz) excluding Rh

5,000 Rh Price (US$/oz)


Jul 06

0 Sep 06 Oct 06 Dec 06 Feb 07 Rhodium


Source: Datastream

Seymour Pierce Research


Aquarius Platinum 8 March 2007

Aquarius Platinum - earnings valuation matrix using forecast metals prices
Value (US$/share) Weighted value (US$/share)

Valuation summary




Peak EPS Peak CFPS Mid-cycle EPS Mid-cycle CFPS Trough EPS Trough CFPS Discounted FCF Price to Book

2.76 4.93 2.44 4.41 1.69 3.26 4.83

6 4 18 12 11 7 8.0% 1.4

16.56 19.71 43.84 52.94 18.59 22.80 27.08 6.76 26.03/13.35

10% 10% 15% 15% 10% 10% 20% 10%

1.66 1.97 6.58 7.94 1.86 2.28 5.42 0.68 28.37/14.55 41.29/21.17 17.53/8.99

Average per share (US$/£) Peak per share (US$/£) Trough per share (US$/£)
Source: Seymour Pierce Limited

Base metal prices





Ni & Co price (US$/lb)

20.00 3.00 15.00 2.00 10.00 1.00

Cu price (US$/lb)


0.00 0.00 Feb 05 Apr 05 Jun 05 Aug 05 Sep 05 Nov 05 Jan 06 Mar 06 May 06 Jul 06 Sep 06 Oct 06 Dec 06 Feb 07 Nickel Cobalt Copper

Source: Datastream


Seymour Pierce Research

Aquarius Platinum 8 March 2007


Growing production
Having produced just less than 450,000 oz of PGM in FY2006, and with production set to grow to around 700,000 oz by FY2008, Aquarius has become one of the most significant primary platinum group metal producers in the world. The company is the fifth largest producer of platinum in the world (260,000oz) with only Norilsk in Russia and the other established South African producers, Anglo Platinum, Impala Platinum and Lonmin producing more.

The strategy
Focussing on smaller PGM operations, which allow high levels of mechanisation

Aquarius has found considerable success by focusing on relatively small, underground and open pit operations, which allow for a high degree of mechanisation. This has been in contrast to the ‘traditional’ approach of the South African PGM mining operations, which has tended to focus on longlife, labour intensive projects. The model is based on the use of key operational contractors with Aquarius, and its operating subsidiaries, assuming management roles. This has given Aquarius a strong track record in project construction and budgeting. First production from the Everest mine in 2006 on time and under budget gives the most recent example. The company has also chosen to negate the substantial financial and technical barriers associated with downstream processing and marketing of PGMs. PGM-bearing concentrates produced at the company’s operations are sold under long term contracts to major refiners, such as Impala Refining Services (IRS). Although this precludes the company from receiving full value for the metal it produces, the long running saga of Lonmin’s faltering refining infrastructure suggests the decision has a very rational basis. Black Economic Empowerment During 2004, Aquarius completed a Black Economic Empowerment (BEE) transaction, as required under the South African Mineral and Petroleum Resources Development Act 2002, with an empowerment consortium of three companies (SavCom) led by Savannah Resources (Pty) Limited. The deal saw SavCom take a 29.5% stake in Aquarius’s South African subsidiary, AQPSA, for ZAR860m in cash and shareholder loans. These funds were used in the development of the Everest mine. Prior to the deal Aquarius held a 75% stake in AQPSA with Impala Platinum holding the remaining 25%. The deal saw SavCom acquiring both an existing equity interest in AQPSA from Aquarius and subscribing for new equity in AQPSA. At the same time Impala acquired new shares in the enlarged AQPSA to take a 20% stake, leaving Aquarius Platinum with a 50.5% stake.

The company produces concentrates only, losing upside value, but reducing financial exposure and operational risk

BEE compliance achieved through deal with SavCom consortium in 2004

SavCom paid ZAR860m for a 29.5% stake in South African operating subsidiary

Seymour Pierce Research


Aquarius Platinum 8 March 2007

SavCom to sell stake in subsidiary back to Aquarius for BEE compliant stake in parent company

The next phase of the transaction will see SavCom sell its shareholding in AQPSA, along with cession of all claims in respect of its shareholder loans, to Aquarius for a sizeable stake in the company. This will leave Aquarius with an 80% holding in AQPSA as shown diagrammatically below. There were three conditions, which needed to be fulfilled for this phase to commence, with the conversion to ‘new order’ mining rights at Kroondal, Marikana and Everest the most significant. This step was achieved in October last year with the Department of Minerals and Energy granting ‘new order’ rights on all three mines and hence implying its satisfaction with the group’s adoption of the 2002 Act, including its BEE commitments. The company’s chromite tailings treatment plant is not classified as a mining operation and hence does not require BEE party involvement.

Aquarius started the buy back with a US$46.7m cash purchase of 3.5% of AQPSA from SavCom

In November 2006, Aquarius began the partial implementation of the next phase of the BEE deal by acquiring a 3.5% stake in AQPSA from SavCom for US$46.7m. When completed, the deal will take Aquarius’s stake to 54% and SavCom down to 26%, and hence into line with the requirements of the 2002 Act and associated Mining Charter. Aquarius chose to use its substantial cash position to fund the purchase as opposed to issuing stock as stated in the original deal. SavCom’s expected future stake in Aquarius was reduced accordingly to 21.68m (26%).
Aquarius Platinum – Corporate structure*

Final 26%

Aquarius Platinum Limited

Current 50.5%/ Interim 54%/Final 80%

100% 50%
Aquarius Platinum Corporate Services Mimosa Holdings

8.4% Impala 50% 20%

Aquarius Platinum South Africa

Current 29.5%/Interim 26%/Final 0%



Savannah BEE Consortium


*Authorisation is still awaited for the November SavCom-Aquarius deal. Source: Aquarius Platinum Limited


Seymour Pierce Research

Aquarius Platinum 8 March 2007


Where the magic happens
The company has stakes in four producing operations in South Africa and one in Zimbabwe

Aquarius has interests in four producing operations in South Africa and one in Zimbabwe. The four operations in South Africa are located on the Bushveld Igneous Complex (BIC) in the north of the country. The BIC contains the single largest PGM deposit in the world. The Zimbabwean operation is located on the southern section of the Great Dyke, a sinuous (4-11km wide), igneous body which runs for 550km across the country.

South African production
Mining on the BIC accounts for over 75% of the world’s platinum production, 34% of the world’s palladium and over 85% of the world’s rhodium. Total estimated proven and probable reserves of platinum and palladium in the BIC stand at 203.3Moz ounces and 116.1Moz, respectively. In addition to these reserves, inferred resources were estimated at 939Moz of platinum and 711Moz of palladium (source: Prof. G. Cawthorn, University of Witwatersrand, South Africa). Based on Johnson Matthey’s estimated demand for platinum and palladium demand in 2006 of 7.02Moz and 6.85Moz, respectively, this equates to 162 years and 120 years of demand. Aquarius Platinum – Operations Aquarius has three operations on the western limb of the BIC (Kroondal, Marikana and the chromite tailings retreatment project) and one (Everest) on the eastern limb, as shown on the following map.
Aquarius Platinum – Location of South African operations

Total Busveld Platinum reserves estimated at 203Moz

Source: Johnson Matthey Plc.

Seymour Pierce Research


Aquarius Platinum 8 March 2007

Kroondal (50% AQPSA)
Kroondal - key recent production parameters
Processed (Mt) Head grade (g/t) Recovery rate (%) Total 3E PGE+Au prod (oz) Attrib 3E PGE+Au prod (oz) Costs (US$/oz)

2006 2007H1

6.04 3.36

2.89 2.86

78.3% 77.5%

439,444 238,902

219,722 119,450

403 396

Source: Aquarius Platinum Limited

Kroondal opened in 1999. The mine produced 50% of the company’s attributable 3E PGE+Au in 2006

Production began at Kroondal, Aquarius’ first operating mine, in 1999. The mine is a core asset for Aquarius, accounting for just under 50% of the company’s attributed 447,693oz 3E PGE and gold ounces during FY2006. The mine exploits the UG2 reef with platinum accounting for approximately 60% of total PGE output, palladium 29% and rhodium 11%. In 2003, Aquarius extended the life of the operation by entering into a pool and share agreement (P&SA1) with Anglo Platinum, which owns the adjacent property. By incorporating the resources on Anglo’s land, the life of the mine has been extended from 2008 to 2017 with all revenue, costs and capital expenditure shared equally between the partners. Underground operations account for over 90% of production, with five shafts now in production. Underground mining is by mechanised bord-and-pillar. Concentrate is treated under an off-take agreement by Impala Refining Services (IRS). This arrangement comes to an end in 2008 when concentrate will be treated by Anglo Platinum under the terms of P&SA1. In 2005 a new 3Mt per annum concentrator was commissioned at the mine, which effectively doubled Kroondal’s annual production capacity to just over 0.5Moz 3E PGE + Au per annum. The company looks set to achieve this approximate level of production in the next financial year to June 2008.
Kroondal - Reserves (at 30 June 2006)
Orebody (Mt) 3E PGE + Au (g/t) 3E PGE + Au (Moz)

Aquarius entered a pool and share agreement with Anglo Platinum in 2003. Life of mine extended to 2017

Proved open pit Proved underground Probable underground Total
Source: Aquarius Platinum Limited

0.04 57.82 9.45 67.31

4.17 2.95 3.23 2.99

0.01 5.48 0.98 6.47


Seymour Pierce Research

Aquarius Platinum 8 March 2007

Kroondal - resources (at 30 June 2006)
Orebody (Mt) 3E PGE + Au (g/t) 3E PGE + Au (Moz)

Measured Indicated Inferred Total
Source: Aquarius Platinum Limited

50.03 9.26 1.42 60.71

5.83 6.16 6.12 5.89

9.38 1.83 0.28 11.49

Marikana (50% AQPSA)
Marikana - Key recent production parameters
Processed (Mt) Head grade (g/t) Recovery rate (%) Total 3E PGE+Au prod (oz) Attrib 3E PGE+Au (oz) Costs (US$/oz)

2006 2007H1

1.25 0.99

3.2 3.18

66.8% 69.4%

85,913 69,941

56,617* 34,971

782 609

*P&SA2 effective from Q2 onwards. Source: Aquarius Platinum Limited

The Marikana operation, which lies just 8km east of Kroondal on the western limb of the BIC, became Aquarius’s second operating mine in 2002. The project is still dominated by open pit production, but in January 2006, underground production from Kroondal No. 4 shaft was transferred to Marikana. Development at the operation’s original underground shaft is ongoing and by Q2 2007 underground production represented 33% of the total tonnage. As the operation proceeds, underground mining will become the major source of ore. The ratio in the PGM basket is very similar to Kroondal and currently sits at around 61.4% platinum, 28.5% palladium and 9.3% rhodium. The company sells its concentrate to IRS under a life of mine off-take agreement.
P&SA2 with Anglo Platinum effective from September 2005. Production to rise to 250,000oz PGM

As at Kroondal, life of the operation has been extended via a pool and share agreement (P&SA2) with Anglo Platinum, which sees the two producers share production and costs equally. The agreement came into effect in September 2005 and production is now scheduled to run to 2024. Anglo Platinum will refine and sell its own share of production under P&SA2. With the increased resources coming from Anglo Platinum’s RPM property and increased processing capacity (3Mt per annum) added via the retrofit of a dense media separation plant at the mine concentrator, annual production at Marikana is set to reach 250,000oz PGM.

Seymour Pierce Research


Aquarius Platinum 8 March 2007

Marikana - Reserves (at 30 June 2006)
Orebody (Mt) 3E PGE + Au (g/t) 3E PGE + Au (Moz)

Proved open pit Probable open pit Proved underground Probable underground Total
Source: Aquarius Platinum Limited

7.66 0.88 24.52 6.07 39.13

3.26 5.58 3.12 3.2 3.22

0.80 0.16 2.46 0.62 4.04

Marikana - Resources (at 30 June 2006)
Orebody (Mt) 3E PGE + Au (g/t) 3E PGE + Au (Moz)

Measured Indicated Inferred Total
Source: Aquarius Platinum Limited

29.77 11.39 3.67 44.83

5.05 5.14 3.14 4.92

4.83 1.88 0.37 7.09

Everest (100% AQPSA)
Everest - Key recent production parameters
Processed (Mt) Head grade (g/t) Recovery rate (%) Total 3E PGE+Au prod (oz) Attrib 3E PGE+Au (oz) Costs (US$/oz)

2006 2007H1

1.462 1.265

3.04 2.80

67.9% 72.0%

97,031 82,908

97,031 82,908

375 447

Source: Aquarius Platinum Limited

First production in 2006 with start up on time and under budget

Everest is wholly owned by Aquarius and is the company’s only operation on the eastern limb of the BIC. Construction began in late 2004 with first production achieved during 2006, when the mine was brought on-line ahead of schedule and below budget. The operation consists of an open pit and underground workings which exploit the UG2 reef from a basin-shaped section of the eastern limb. The mine is planned to become an exclusively underground operation next year, based on bord-and-pillar stoping techniques. Platinum still dominates the PGM suite, accounting for 58% of production with palladium at 33% and rhodium at 8%. The targeted production rate is 225,000oz PGM per annum, with the mine expected to operate until 2016. The concentrate produced and refined by IRS under an off-take agreement.

Production of 225,000 oz per year is planned with operations running until 2016


Seymour Pierce Research

Aquarius Platinum 8 March 2007

Everest - Reserves (as at 30 June 2006)
Orebody (Mt) 3E PGE + Au (g/t) 3E PGE + Au (Moz)

Proved open pit Probable open pit Proved underground Probable underground Total
Source: Aquarius Platinum Limited

0.17 0.17 14.59 9.63 24.56

1.89 2.86 3.15 3.11 3.12

0.01 0.02 1.48 0.96 2.47

Everest - Resources (as at 30 June 2006)
Orebody (Mt) 3E PGE + Au (g/t) 3E PGE + Au (Moz)

Measured Indicated Inferred Total
Source: Aquarius Platinum Limited

19.05 18.17 6.92 44.14

3.76 3.23 2.36 3.32

2.30 1.89 0.53 4.71

Chromite Tailings Retreatment Plant (50% Aquarius)
Chrome Tailings Retreatment plant - key production parameters
Processed Head grade (Mt) (g/t) Recovery rate (%) Total 3E PGE+Au prod (oz) Attrib 3E PGE+Au (oz) Costs (US$/oz)

2006 2007H1

0.162 0.07

3.21 4.04

37.3% 48.0%

6,234 3,576

3,117 1,788

394 300

Source: Aquarius Platinum Limited

The operation is not managed by AQPSA, but by a second Aquarius subsidiary, ACS

Aquarius (50%) and its consortium partners, Ivanhoe Platinum and Nickel (25%) and Sylvania South Africa (25%), have been treating dumps and tailings streams from Kroondal and chromite mines surrounding Kroondal since January 2005. As the feedstock has been processed by these operations in the past, only a flotation circuit is required to produce a pgm concentrate. The operation is relatively low cost therefore with no crushing or milling required. The consortium plans full production of 28,000oz PGM per annum, of which 50% will be attributable to Aquarius Platinum. The project is planned to run until 2016. This level of production looks some way off with the operation lacking both the throughput and recovery rates at present. The company is currently experimenting with the processing circuit to improve the recovery rates from the various feedstocks. The concentrate is treated under off-take agreements with Rustenburg Platinum Mines (RPM) and Impala Refining Services (IRS).

Planned production of 28,000oz PGM per annum, but experiencing problems with recovery rates at present.

Seymour Pierce Research


Aquarius Platinum 8 March 2007

Zimbabwean production
The Great Dyke contains four significant pgm-bearing geological complexes. The Hartley Complex is the largest, containing approximately 80% of the Dyke’s total PGM resources, and supports the Ngezi and Hartley Platinum mines operated by Zimplats. Aquarius’ Mimosa mine lies in the Wedza Complex on the southern section of the dyke. Johnson Matthey estimates total platinum production from Zimbabwe’s Great Dyke at 170,000oz in 2006.
Aquarius Platinum – Location Mimosa, Zimbabwe


Aquarius Other platinum mines

Source: Aquarius Platinum Limited

Mimosa (50% Aquarius)
Mimosa - Key recent production parameters
Processed (Mt) Head grade (g/t) Recovery rate (%) Total 3E PGE+Au prod (oz) Attrib 3E PGE+Au (oz) Costs (US$/oz)

2006 2007H1

1.713 0.935

3.71 3.66

69.7% 78.0%

142,407 76,078

71,204 38,039

336 395

Source: Aquarius Platinum Limited

50:50 JV with Impala Platinum. US$37m capex has raised production capacity to 195,000 oz 4E PGE

Mimosa is a 50:50 joint venture with Impala Platinum. As at Kroondal and Marikana, extraction at Mimosa is by mechanised bord-and-pillar mining. Concentrate is transported by road across the South African border to Rustenburg and treated by IRS. This is the least platinum-rich of the company’s operations, with platinum accounting for just under 51% of the major metal mix, palladium 38%, rhodium 4% and gold 8%. The mine also produces around 2,000t of nickel, 2,000t of copper and over 100,000lbs of cobalt. At present, the mine is expected to have a life of at least 40 years, giving it the longest operational life of the current portfolio.


Seymour Pierce Research

Aquarius Platinum 8 March 2007

Concentrator throughput was increased by 25% in FY2006 to 1.8Mt per annum during the US$14m Wedza Phase IV upgrade, and has recently been increased again to 2.1Mt per annum in the Phase V upgrade at a cost of US$23.2m. This gives production capacity of 195,000oz PGM, which is the long-term target production for the operation. Operating in the current political climate of Zimbabwe clearly entails certain challenges. At present, Zimbabwe’s administration is some way behind the South African Government in implementation of its BEE-equivalent, ‘indigenisation’ policy. The policy is at the discussion stage, but may allow the Government to acquire a 51% stake in certain projects, including PGM mines such as Mimosa. 25% would be assumed without payment as soon as the law was passed with the remaining 26% earned over a five-year period. Interestingly, Zimplats struck a deal with the government in May last year in which 36% of its mining claims that lie outside of its long-term mine plans have been sold to the government for cash and an empowerment credit for potential development by other parties. This deal also helped to secure long term tenure over the main mining asset. A similar deal may be possible at Mimosa, but there has yet to be a comment on the subject from either member of the JV.
Mimosa - Reserves (as at 30 June 2006)
Orebody (Mt) 3E PGE + Au (g/t) 3E PGE + Au (Moz)

Proved underground Probable underground Total
Source: Aquarius Platinum Limited

18.52 14.98 33.50

3.71 3.52 3.63

2.21 1.70 3.90

Mimosa - Resources (as at 30 June 2006)
Orebody (Mt) 3E PGE + Au (g/t) 3E PGE + Au (Moz)

Measured Indicated Inferred Total
Source: Aquarius Platinum Limited

44.20 26.21 21.13 91.54

4.01 3.58 3.84 3.85

5.70 3.02 2.61 11.33

Exploration In October last year Aquarius signed a farm-in agreement with Bakgaga Mining to conduct feasibility on its properties to the west of the Anglo Platinum’s Lebowa mine on the eastern limb of the BIC. The licences represent greenfield exploration, but Aquarius believes the landholding contains approximately 2,000hectares underlain by both the Merensky and UG2 PGM-bearing reefs. Aquarius will pay Bakgaga ZAR1.2m for existing data and a budget for initial work has been set at ZAR2.5m. Should results be positive, Aquarius will fund a feasibility study, estimated to cost ZAR20m.

Seymour Pierce Research


Aquarius Platinum 8 March 2007


Where does it all go?
Applications for PGMs span a very broad range, from cancer treatment through catalysis to jewellery. Supply sources are limited and the small scale of the markets makes illiquidity and price volatility very regular features. The platinum and rhodium markets are currently close to equilibrium in terms of physical supply and demand, whilst the palladium market is in oversupply. We expect these conditions to broadly continue in coming years with prices easing as part of the greater commodity market cycle.

Key drivers in the PGM markets
Automotive demand will continue to dominate the markets in coming years

In its latest interim review, Johnson Matthey reports that platinum demand set a new record in 2006 at 7.02Moz. This was driven by a 15% increase in demand from the automotive industry for autocatalysis to 4.38Moz. In recent years, there has been a significant shift in the demand profile for platinum with autocatalysis surpassing jewellery as the largest application. In 2006, net demand from the automotive industry (3.6Moz) was twice the demand for jewellery. This is a complete reversal of the situation in 1999 and 2000. Although, other applications such as glass making, technology and chemical/petrochemical applications have important roles to play, it is these major applications along with the strong commodity investment market and production rates which will dominate the market going forward.
Major demand applications for platinum in 2006

Petroleum 3%

Other 7%

Jewellery 25%

Autocat (net) 49%

Glass 5% Electrical 6% chemical 5%

Source: Johnson Matthey Plc

Growing popularity of diesel vehicles and tightening emissions legislation driving platinum demand

Palladium now being used in some diesel applications

Automotive demand for platinum is dominated by diesel vehicles. Diesel vehicles now represent over 50% of the European light duty vehicle market and this figure is expected to continue to grow. Elsewhere, tightening emissions legislation is forcing manufacturers to fit platinum-bearing catalysts to exhaust systems in both heavy and light duty trucks. With the discrepancy in price and advancement in technology, palladium has now begun to make initial inroads into the diesel market. Substitution of palladium for platinum in gasoline applications has been underway for sometime.


Seymour Pierce Research

Aquarius Platinum 8 March 2007

It appears likely that these substitution trends will continue wherever viable. This may lead to a small, but significant reduction in platinum demand.
Major demand applications for palladium in 2006
Other 3%

Jewellery 16%

Electronics 15%

Autocat (net) 49%

Dental 12%

Chemical 5%

Source: Johnson Matthey Plc

Platinum jewellery demand continuing to wane

Platinum jewellery demand remains under pressure at these high price levels as manufacturing margins are squeezed. The crucial, Chinese market lost a further 11.2%. Palladium jewellery has replaced much of the lower-end platinum market and this situation is expected to continue.
Major demand applications for rhodium in 2006

Electrical 1% Chemical 5%

Glass Other 2% 5%

Autocat (net) 87%

Source: Johnson Matthey Plc

Rhodium demand is dominated by its use in autocatalysis and its usage is expected to increase steadily with the growth in car production amongst the emerging economies and the general tightening of emissions legislation worldwide. Amongst the minor PGMs, ruthenium has seen a considerable increase in demand in recent times from the electronics industry, where it is used to improve the storage capacity in some hard disks. This has lead to a marked increase in the metal’s price. Demand for iridium has also risen, driven by increased usage in the electrochemical and chemical industries.

Seymour Pierce Research


Aquarius Platinum 8 March 2007

Expansion in the South African PGM mining sector will supply additional metal to the market going forward

Platinum production is dominated by South Africa with the country supplying 78% of global production. We believe, if major producers, such as Aquarius can continue to make good on their expansion plans, there should be sufficient metal available for the expected modest growth in demand in coming years. Furthermore, expansion of platinum mining operations on the Bushveld will produce additional palladium and rhodium as by products, helping to stabilise those markets. Supply of palladium from Russia is expected to be relatively stable around the 4Moz.
Platinum production by country in 2006

Zimbabwe 2% North America 5% Russia 13%

Others 2%

South Africa 78%

Source: Johnson Matthey Plc

Aquarius Platinum – Palladium production by country in 2006

Zimbabwe 2% North America 11%

Others 2%

South Africa 34%

Russia 51%

Source: Johnson Matthey Plc

We are forecasting a decline in all PGM prices from current levels, but must expect volatility in the short term

Placing this scenario against the backdrop of the commodity cycle leads us to forecast a continuation of strong PGM prices during 2007 and 2008. The greatest unknown at the present time must be the role of commodity investors within the markets. Trading on the futures market such as TOCOM and NYMEX typically has the most pronounced effect on short-term price movement in the platinum and palladium markets. This is likely to continue and will mean price movement is unlikely to plot a smooth curve.


Seymour Pierce Research

Aquarius Platinum 8 March 2007

Seymour Pierce metal price estimates
Year end 30 June 2004 2005 2006 2007E 2008E

Platinum (US$/oz) Palladium (US$/oz) Rhodium (US$/oz) Ruthenium (US$/oz) Iridium (US$/oz) Gold (US$/oz) Nickel (US$/lb) Copper (US$/lb) Cobalt (US$/lb)
Source: Seymour Pierce Limited estimates

773 210 640 48 133 410 5.30 1.04 19.02

863 218 1,119 67 166 445 6.42 1.43 14.92

1,006 268 3,015 131 247 604 8.57 2.31 15.15

1,156 324 5,146 395 367 620 10.64 2.89 15.30

1,044 293 5,124 535 356 485 8.62 2.50 15.45

Seymour Pierce Research


Aquarius Platinum 8 March 2007


Reality check
Aquarius plans to increase production by over 250,000oz (57%) in the near term. With PGM prices expected to continue above their historic averages in the short term, Aquarius should enjoy a substantial increase in earnings and cash generation in coming years. The company has only modest debt, so how the management plans to make best use of its cash surplus is the most prominent question at the current time. At the recent interim results, CEO Stuart Murray clearly stated that the company was actively evaluating acquisition opportunities, principally within South Africa. Aquarius is certainly not alone amongst the South African platinum producers in looking for acquisitions. Only last month, Impala Platinum tabled a 55p/share (£297m) cash offer for Aim-listed African Platinum (Afplats), representing a 35% premium to the share price. Afplats’ main asset is the Leeuwkop project on the western limb of the Bushveld with 92Moz of resources. Aquarius’ previous concern has been the high development costs of Bushveld projects, but with strong metal prices expected to continue, the perspective on such projects appears to be changing. If suitable projects can’t be found, the pledge has been made to return cash to shareholders.

Production estimates
All mines to move to long term target production levels by FY2008

Attributable production to rise by 57%

The next two years is clearly a key period for Aquarius with increased production expected at all operations. By FY2008, the company’s long term production targets should have been all but achieved at the four major mines. These targets are 505,000oz at Kroondal, 250,000oz at Marikana, 225,000oz at Everest and 195,000oz at Mimosa in Zimbabwe. We expect this will boost production attributable to Aquarius by 57% from the 2006 level of 448,000oz, based on its current stake in AQPSA, to 704,000oz. The rapid expansion at Everest and Marikana will see these operations increase their contribution in total attributable production to 32% (+10%) and 18% (+5%), respectively. In contrast the relative shares of production from Kroondal and Mimosa will fall to 36% and 14%, respectively. However, Kroondal will remain the most significant operation, producing more than twice as much metal as the next largest operation, Marikana. The relative proportions of the company’s PGM basket should show little change over the next five years with platinum accounting for just over 59% of total 3E production, palladium 32% and rhodium 9%. Beyond FY2008, production from existing operations should stabilise at, or around, the target levels as outlined above for the long term. As production rises, costs per ounce are expected to fall significantly at all the company’s South African operations. Marikana should see the greatest fall corresponding with the large rise in production. We are forecasting a modest increase in costs at Mimosa in US dollar terms, but with the hyperinflationary environment of Zimbabwe any forecast may be subject to change.

Weighted average production costs to fall


Seymour Pierce Research

Aquarius Platinum 8 March 2007

Overall, we forecast production weighted average costs will fall by 8.2% between FY2006 and FY2008, reaching US$369/(3E PGE+Au) oz by FY2008.
Aquarius Platinum Limited - Production estimates
Year end 30 June 2004 2005 2006 2007E 2008E

South African Production Aquarius Platinum South Africa (AQPSA) mines Kroondal (50% AQPSA) Total 4E prod. (000 oz) 237.6 Attrib. 4E prod. (000 oz) 160.2 Cost (US$/oz) 315 Marikana (50% AQPSA) Total 4E prod. (000 oz) Attrib. 4E prod. (000 oz) Cost (US$/oz) Everest (100% AQPSA) Total 4E prod. (000 oz) Cost (US$/oz) AQPSA total production Total 4E prod. (000 oz) Attrib. 4E prod. (000 oz) Cost (US$/oz) Other South African production Chromite Tailings Retreatment Plant (50% Aquarius) Total 4E prod. (000 oz) 0.0 Attrib. 4E prod. (000 oz) 0.0 Cost (US$/oz) 0 Zimbabwean production Mimosa (50% AQP) Total 4E prod. (000 oz) Attrib. 4E prod. (000 oz) Cost (US$/oz)) Total Total 4E prod. (000 oz) Attrib. 4E prod. (000 oz) Cost (US$/oz)

324.7 162.4 361

439.4 219.7 379

503.3 251.7 386

503.3 251.7 336

87.2 87.2 626

99.2 99.2 628

85.9 56.6 685

170.0 85.0 593

250.0 125.0 506

0.0 -

0.0 -

97.0 353

175.0 404

220.0 291

324.8 247.4 398

423.9 261.5 423

622.4 373.4 417

848.3 511.7 431

973.3 596.7 369

2.1 1.1 376

6.2 3.1 370

8.6 4.3 290

12.3 6.2 241

119.4 59.7 253

130.2 65.1 358

142.4 71.2 336

167.7 83.8 395

192.7 96.4 375

444.2 307.1 359

556.2 327.7 408

771.0 447.7 402

1,024.7 599.8 424

1,178.4 699.2 369

Source: Aquarius Platinum Limited and Seymour Pierce Limited estimates

Seymour Pierce Research


Aquarius Platinum 8 March 2007

FY2007 and FY2008 should bring consecutive record earnings

The combination of rapidly expanding production and strong metal prices lead us to expect FY2007 and FY2008 to be a very significant period with respect to earnings for the company. As discussed, the company produces metal in concentrate and as a result does not receive the full value for the contained metal due to refining and treatment charges. In the table below we have attempted to estimate the basket price the company will receive for both the 3E and 5E PGE plus gold baskets in the coming years. We have also provided estimates of the revenue that the company receives for its base metal output, which are also subject to charges from the company’s refining partners.

Seymour Pierce –estimates of prices received for metal in concentrate
Year end 30 June 2004 2005 2006 2007E 2008E

Full prices Platinum (US$/oz) Palladium (US$/oz) Rhodium (US$/oz) Gold (US$/oz) Ruthenium (US$/oz) Iridium (US$/oz) Nickel (US$/lb) Copper (US$/lb) Cobalt (US$/lb) Estimated received prices 3E+Au basket price (US$/oz) 5E+Au basket price (US$/oz) Nickel (US$/lb) Copper (US$/lb) Cobalt (US$/lb)

773 210 640 410 48 133 5.30 1.04 19.02

863 218 1,119 445 67 166 6.42 1.43 14.92

1,006 268 3,015 604 131 247 8.57 2.31 15.15

1,156 324 5,146 620 395 367 10.64 2.89 15.30

1,044 293 5,124 485 535 356 8.62 2.50 15.45

1,027 934 8.83 2.39 12.70

958 891 7.15 2.08 12.83

Source: Aquarius Platinum Limited and Seymour Pierce Limited estimates

Despite a modest reduction in metal prices from their 2007 level, FY2008 should bring record financials with turnover of US$751.0m, profit before tax of US$432.3m and attributable profit of US$186.0m.


Seymour Pierce Research

Aquarius Platinum 8 March 2007

Aquarius Platinum Limited - earnings estimates
Year end 30 June (US$m) 2004 2005 2006 2007E 2008E

Attrib. 3E+Au prod. (000 oz) Mine Sales Other income Turnover Operating costs Dep’n & Amor’n Admin Royalties & other Exceptionals PBIT Net interest Exceptional items Profit before tax Tax Minorities Attributable profit Dividend Retained profit Recurrent profit EPS (UScents) Recurrent EPS (UScents) DPS (UScents)

307.1 175.1 14.5 189.6 112.6 12.2 8.6 0.6 5.0 60.5 -11.5 5.0 49.0 5.7 -4.8 38.6 2.5 36.2 33.7 47.18 41.13 3.00

327.7 210.1 8.3 218.5 153.8 26.5 6.0 1.4 0.0 30.8 -2.8 0.0 28.1 3.4 -3.7 21.0 5.0 16.0 21.0 25.32 25.32 8.00

447.7 417.4 14.1 431.5 199.5 28.8 8.1 1.8 0.0 193.3 -1.2 0.0 192.1 51.1 -55.4 85.6 9.1 76.5 85.6 100.86 100.86 24.00

599.8 634.5 14.1 648.6 254.3 31.2 11.1 4.8 0.0 347.1 2.0 0.0 349.1 104.7 -101.4 143.0 50.1 93.0 143.0 168.98 168.98 59.14

699.2 750.1 0.9 751.0 264.5 32.5 13.2 8.6 0.0 432.3 5.1 0.0 437.3 131.2 -120.2 186.0 93.0 93.0 186.0 219.74 219.74 109.87

Source: Aquarius Platinum Limited and Seymour Pierce Limited estimates

South African production royalties to start in 2009

South African Royalties As with all South African producers, the company’s South African earnings will be liable for mineral royalties from May 2009 onwards. The company has been paying revenue-based royalties in Zimbabwe since 2004 at the rate of 3% for precious metals and 2% for base metals. The onset of royalty payments in South Africa coincides with the deadline for mining companies to convert their royalty-free ‘old order’ mining rights to ‘new order’ mining licences under the 2002 Mining Act. The industry had been hoping that the original revenue-based model proposed in the draft legislation in 2003 would be revised to a profit-based model. This did not prove to be the case when new drafts were released in October last year. However, the government did reduce rates for refined and semi-processed products in an effort to encourage value-enhancing mineral beneficiation within South Africa. The table below gives the rates relevant to Aquarius.

Seymour Pierce Research


Aquarius Platinum 8 March 2007

Proposed South African mining royalties
Metal Unrefined (%) Refined (%)

PGM Gold & Silver Base metals
Source: South African National Treasury Dept

6.0 3.0 4.0

3.0 1.5 2.0

We believe Aquarius should qualify for the lower royalty rates

Although Aquarius only produces metal in concentrate, and not refined product, we believe the company will be eligible for the lower rate. During a recent global roadshow by the South African Department of Minerals and Energy, senior officials implied that companies transferring material for beneficiation within South Africa would be eligible for lower rates, assuming an agreement can be reached with the refiner concerned. Although these rates are yet to be set firm, as the bill has not been put before parliament, we have applied them to the company’s revenues. Minorities The substantial payments to minorities relates to the other stakeholders in AQPSA, namely SavCom (26%) and Impala Platinum (20%). As discussed earlier, Aquarius has recently begun a transaction to exchange SavCom’s stake in AQPSA for a significant shareholding in Aquarius. So far 3.5% of SavCom’s holding has been acquired for US$46.7m. The deadline for the remainder of this transaction remains unqualified in any detail and we have not attempted to predict this in our forecasts. Naturally, attributable profit will rise as minorities fall, but estimating the revised share base and all associated distributions of earnings in Aquarius is extremely difficult. If the company continues to use its growing cash pile to buy out SavCom, dilution will be kept to a minimum, but this will be governed ultimately by BEE regulations.


Seymour Pierce Research

Aquarius Platinum 8 March 2007

Cash flow estimates
Operating cash flow expected to increase further in FY2008

We include full payment of the SavCom loan in the FY2007 cash flows

The combination of increasing production and strong metal prices means Aquarius has the potential to be extremely cash rich in coming years. Operating cash flow is forecast to rise to US$446.2m in FY2008 and will continue at a healthy rate thereafter. Best use of the funds is obviously a key strategy point for Aquarius. The company has already stated its intention to pay off interest-bearing loans, and we have included full payment of the US$13.8m loan from SavCom in the FY2007 cash flow. As discussed, a cash payment for a small percentage of SavCom’s holding in AQPSA has also been made. Additional uses include acquisitions and exploration. To this end the company entered a farm-in agreement with Bakgaga Mining late last year to conduct exploration and feasibility studies over five farms on the northern tip of the Bushveld’s western limb. We await news of any significant acquisitions.

Aquarius Platinum Limited - Cash flow estimates
Year end 30 June (US$m) 2004 2005 2006 2007E 2008E

Operating profit Dep'n and Amor’n Other non-cash Change in working cap Operating cash flow Net interest Dividends Taxation

60.5 12.2 0.0 16.6 89.2 -8.4 -4.8 -3.7 -16.9 -28.5 18.2 66.8 4.6 16.0 0.0 82.6 0.0 40.3 122.9

30.8 26.5 0.0 -17.8 39.5 -3.2 -5.0 -1.6 -9.8 -92.4 4.3 -53.5 28.1 31.7 0.0 1.4 -0.9 77.9 78.4

193.3 28.8 0.0 -25.6 196.5 -2.1 -9.1 -32.0 -43.3 -102.9 0.0 59.5 29.1 7.2 0.0 86.7 -2.6 78.4 162.4

347.1 31.2 0.0 -31.3 347.1 2.0 -50.1 -104.7 -152.8 -54.6 0.0 189.7 -13.8 0.0 -46.7 79.2 0.0 162.4 241.6

432.3 32.5 0.0 -18.6 446.2 5.1 -93.0 -131.2 -219.1 -30.0 0.0 290.0 0.0 0.0 0.0 197.1 0.0 241.6 438.7

Net capital expenditure Acquisitions/disposals

Debt raised Shares issued BEE Transaction Cash flow Forex movements Cash at start of year Cash at end of year

Source: Aquarius Platinum Limited and Seymour Pierce Limited estimates

We assume a substantial rise in dividend payments from FY2007 onwards

The key point for shareholders remains the dividend policy the company will adopt in coming years. Dividend payouts from the other major South African platinum producers in 2006 ranged between 32% (Lonmin) up to 93% (Northam) of earnings attributable to ordinary shareholders. Aquarius paid 24% in comparison. Going forward, we have assumed Aquarius will increase its dividend rate to move into line with its producing peers. A rate equivalent to Northam’s may be too high, but a rate of 50% would place Aquarius in line with Impala (48%, excluding special dividends). The company has pledged to return cash to shareholders if suitable corporate projects can not be found.

Seymour Pierce Research


Aquarius Platinum 8 March 2007

Balance sheet
Even with a much more generous dividend policy, cash generation remains so great that there is a lack of gearing in the balance sheet going forward. This gives an obvious opportunity for the company to better utilise its ever strengthening asset base, either via acquisition or major corporate development. It should be remembered that a significant portion of the group’s cash sits within AQPSA, and hence Aquarius’ effective stake is reduced in line with its shareholding in the subsidiary. Even so, the cash pile remains substantial. This could be considered as a nice problem to have, but with limited acquisition opportunities available on the Bushveld, two major mines scheduled to close by 2017 and long lead times on mine developments, this is certainly a significant issue for management to consider.
Aquarius Platinum Limited - balance sheet estimates
Year end 30 June (US$m) 2004 2005 2006 2007E 2008E

Tangible assets Intangible assets Fixed assets Stocks Trade Debtors Cash Other Current assets Short-term debt Trade creditors Tax and other Current liabilities Long-term debt Interest bearing liabilities Deferred tax liabilities Provisions Non current liabilities Net assets Shareholders' funds Minorities Equity Interests

361.3 0.0 361.3 10.7 23.3 77.9 0.0 111.9 15.6 19.1 7.1 41.8 59.6 62.7 56.9 18.0 197.3 234.2 225.0 9.2 234.2

409.3 0.0 409.3 16.3 44.7 75.3 0.0 136.3 0.0 25.5 9.9 35.5 140.1 16.1 53.8 24.5 234.5 275.6 243.0 32.6 275.6

461.2 0.0 461.2 19.8 66.7 162.4 0.0 249.0 0.0 32.9 2.6 35.5 130.1 45.4 73.3 32.1 280.9 393.8 315.6 78.3 393.8

484.6 0.0 484.6 26.6 100.3 241.6 0.0 368.5 0.0 41.9 2.6 44.5 130.1 31.6 73.3 32.1 267.1 541.4 408.5 132.9 541.4

482.1 0.0 482.1 31.0 116.1 438.7 0.0 585.8 0.0 43.5 2.6 46.2 130.1 31.6 73.3 32.1 267.1 754.6 501.5 253.1 754.6

Source: Aquarius Platinum Limited and Seymour Pierce Limited estimates


Seymour Pierce Research

Key to material interests 1. The analyst has a personal holding of the securities issued by the company, or of derivatives related to such securities. 2. Seymour Pierce Limited or an affiliate owns more than 5% of the issued share capital of the company. 3. Seymour Pierce Limited or an affiliate is party to an agreement with the company relating to the provision of investment banking services, or has been party to such an agreement within the past 12 months. Our corporate broking agreements include a provision that we will prepare and publish research at such times as we consider appropriate. 4. Seymour Pierce or an affiliate has been lead manager or co-lead manager of a publicly disclosed offer of securities for the company within the past 12 months. 5. Seymour Pierce is a market maker or liquidity provider in the securities issued by the company. 6. Seymour Pierce is party to an agreement with the company relating to the production of research recommendations. Distribution of ratings Our research ratings are defined with reference to the amount by which we expect the absolute return to change over the next 12 months: Rating Buy Outperform Hold Underperform Sell Definition Absolute return expected to increase by more than 10% Absolute return expected to increase by between 5% and 10% Absolute return expected to change by between -5% and +5% Absolute return expected to decrease by between 5% and 10% Absolute return expected to decrease by more than 10%

As at 31 December 2006 the distribution of all our published recommendations is as follows: Proportion of recommendations 31% 26% 31% 7% 2% Proportion of these provided with investment banking services 65% 20% 29% 6% 0%

Rating Buy Outperform Hold Underperform Sell

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