March 6, 2012 / 2:02 PM / in 6 years

UPDATE 2-Eastplats posts loss on impairment charge; shares fall

* Q4 loss C$0.07 vs EPS C$0.01 last year

* Says impairment charge on flagship mine hurt operations

* Shares fall 9 percent

By Arnav Sharma

March 6 (Reuters) - Eastern Platinum posted a quarterly loss as the company took an impairment charge on the value of its flagship Crocodile River mine in South Africa, sending the Canadian miner’s shares down as much as 9 percent.

The company said it took a charge of C$46.3 million in the quarter as it determined that the carrying value of the mine exceeded the expected net present value of its future cash flows.

“The loss was almost due to the write-down of the value of their (Eastplats) Crocodile River mine assets in South Africa,” Canaccord Genuity analyst Damien Hackett told Reuters.

High labor and electricity costs and unfavorable foreign currency have hurt metal producers like Eastplats in South Africa, Hackett said.

Analysts have grown increasingly pensive about the South African precious metals industry, as returns remain at historically low levels partly due to rising capital costs.

“Moreover, the situation cannot be balanced as the cost of platinum is not high enough to bring in sufficient amount of returns to balance these input costs,” Hackett added.

On Tuesday, platinum group metals were on track for their biggest one-day loss this year, as strength in the dollar hurt precious metals.

Eastplats, which produces platinum group metals (PGM) that include platinum, palladium and rhodium, said PGM ounces sold fell 39 percent to 19,854 in the fourth quarter.

“Some of these (South African) operations are going to close. Eastplats themselves have taken out some of their growth profile that they have previously been projecting,” Hackett cautioned.

Eastplats operates the Crocodile River mine on the Western Limb of the Bushveld Complex. It has assets on the western and eastern limbs of the Bushveld Complex, which holds about 80 percent of the world’s platinum, according to the company’s website.

In November, South Africa’s Department of Mineral Resources issued a stop-work order at the Crocodile River mine after an employee of an engineering firm working on the development of the mine was killed in an accident.

For the fourth quarter, Eastplats posted a loss of C$64.3 million ($64.2 million), or 7 Canadian cents a share, compared with net earnings of C$5 million, or 1 Canadian cent a share, in the year-ago period.

Shares of Eastplats touched a one-week low of 52 Canadian cents on Tuesday on the Toronto Stock Exchange. They have lost almost two-thirds of their value in the last one year.

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