deutsche report - $9 price target

Strong PGM prices and growing production = strong EPS growth
March Q 4E PGM production decreased 8% qoq to 103koz (DBe 106koz) due to maintenance and contractor changeover. Costs increased 13% qoq to US$787/oz (DBe US$758/oz). However an 18% increase in realized 4E price to US$1,267/oz boosted EBITDA 15% qoq to US$46m (DBe US$52m). We have reduced our F2010 EPS by 10 after factoring in lower production and higher costs, but spot PGM prices are 10% above our 4Q10 forecast. Production should increase ~60% to 660koz by F2012. BUY maintained, A$9.00 PT set at ~1.3xNPV (A$7.00).

Production ? impacted by maintenance and contractor change over 4E Production (3PGE + Au) decreased 8% qoq to 103koz ounces (3% below DBe of 106koz). Production at the flagship operations Kroondal (51.5koz) and Marikana (17.6koz) were down 5% qoq, Mimosa (24.5koz) -2%, but the most material declines were at Platinum Mile (1.3koz) -68% qoq and Blue Ridge (7.7koz) -18%. The major declines were driven by: 1. lost productivity (fewer shifts) during the holiday season 2. equipment failures at Mimosa (1.4km of conveyor belt was
replaced + bad ground) 3. A 9% drop in head grade (to 0.51g/t) and lower recoveries at Platinum Mile 4. contractor change over and primary mill liner failure at Blue Ridge (op is running at 50% of design). In our view, production at steadystate ops Kroondal, Marikana and Mimosa should improve in June Q on higher labour productivity. Blue Ridge on-reef production and hence grade (currently
2.24g/t 4E vs. reserve grade of 3g/t) should increase, and first production from the 185kozpa Everest South mine should commence in Sep Q 2010.

Cash costs ? average C1 4E costs increase 13% to US$787/oz
Cash costs of US$787/oz (DBe US$758/oz) were impacted by lower production, labour inflation and higher electricity prices. We expect a 1-2% decrease in unit costs in F2011 due to low cost (US$650/oz) production from Blue Ridge offsets higher cost production from Everest South (US$750/oz). We note that costs at Blue Ridge are being capitalized until commercial production in 2H 2010.

Valuation declines to A$7.00/share, PT reduced to A$9.00; risks Our A$9 PT is set at 1.3xNPV (A$7.00/share), in-line with the historical premium applied to the other SA PGM equities. Our NPV assumes a nominal 10% rate, and a LT 3E PGM price of US$1,237/oz. Key downside risks include strengthening currencies (ZAR, ZWD) and a delay in the ramp-up of new projects