Eastplats struggles with ‘going concern’ worries
The company has to find enough cash to keep its operations going
Eastern Platinum sounded a “going concern” warning because of large debt incurred for its chrome project, while its mining licences have come under scrutiny because of complications around mandatory black ownership levels underpinning those permits.
Eastplats, which is listed in Toronto and Johannesburg, has all its platinum group metal (PGM) and chrome assets in SA where it halted mining at its two key operations in 2012 and 2013.
It has started retreating tailings at its mothballed Crocodile River Mine near Brits in North West to extract chrome and it is investigating an option to extract PGMs too, as well as potentially restarting its Mareesburg mine near Steelpoort in Limpopo.
While there is an inflow of revenue for the first time in years, the company has heavy care and maintenance costs that erode that income. Eastplats is also entirely dependent on a single company called Union Goal Offshore Solution as the sole buyer of its chrome for its revenue.
“Despite the continued ramp-up of the retreatment project, there remains material uncertainty that the company will be able to achieve sufficient cash inflows to meet its expected obligations in the next 12 months,” Eastplats said in its interim results to end-June.
“There can be no assurance that additional funding will be available to the company when needed, or, if available, that this funding will be on acceptable terms. These factors raise significant doubt about the company’s ability to continue as a going concern.”
With nearly $16m of revenue, Eastplats reported a significant drop in its post-tax loss to $2.2m from $5m the year before. It spent $3.6m on care and maintenance of its assets in the interim period.
Looking at the numbers on a quarterly basis, Eastplats recorded a profit of $382,000 against a second quarter loss of $4.2m the year before.
A worry for Eastplats is a $40m longer term contract that must be paid, a number that increased from $35m at the end of December and relates to a transaction with Union Goal to build the chrome extraction plant.
Cash holdings fell to $1.9m from $4.2m at the end of December. Eastplats noted a sharp kick-up in trade and receivables of $9.7m compared to $1.3m at the end of 2018 because of delays in collecting what was due to it.
“Management have received assurances of continued collections but further delays in the collection of the accounts receivable from Union Goal would create significant operating pressures on the company,” Eastplats said, without giving the reasons for the delayed payments.
Of equally pressing concern is a spat around the empowerment shares that could lead to the black ownership of Eastplats falling below the required 26% under the first two Mining Charters and 30% in the third charter.
It is also dealing with the potential loss of its Spitzkop project close to Mareesburg.
“The company has recently received a notice from the DMR (department of mineral resources) of an appeal launched with the DMR with respect to the company’s mineral license issued in 2012 relating to the Spitzkop property,” it said.
“The company with the assistance of counsel is addressing this matter and intends to defend this issue related to the validly issued mineral rights of Spitzkop.”