Anglo American Platinum, the world’s second-biggest source of platinum group metals (PGMs), has declared force majeure on supplies of metals to customers and lowered its full-year refined output forecast by 900,000oz.
A company declares force majeure, a clause in all supply contracts with customers, to allow it to interrupt that supply if an extraordinary event happens. It carries with it reputational damage and it is not something companies declare easily.
After an explosion on February 10 at its Anglo converter plant (ACP), which treats smelted matte in preparation of putting it through a host of refining processes, Amplats started its second converter plant. However, this second plant continues to have inexplicable water ingress, a dangerous situation when working with metals at very high temperatures.
“This poses a high risk of explosion and the company has determined that it has no other option but to temporarily shut down the phase B unit, to ensure the safety of all employees, and avoid a catastrophic event,” Amplats said. “It is anticipated that the repair works to fix the phase B unit will take approximately 80 days.”
The first plant is expected to return to service by the second quarter of 2021.
“As a result of the temporary closure of the entire ACP, Anglo American Platinum has had to declare force majeure to customers, suppliers of third-party purchase of concentrate, and suppliers of tolling material, as we are unable to complete the processing of material during the converter repair,” it said.
“Production from own mines will continue, and the concentrate from the mines will continue to be smelted at one of the four smelter complexes. However, production from own mines, as well as third-party material, will not be able to be converted to refined production while the ACP is undergoing repairs.”
Amplats, which is 80% owned by Anglo American, will speak to all its peers in SA and internationally to find capacity for refining metals to mitigate the effect of the problems at its processing division, said outgoing CEO Chris Griffith.
Amplats forecasts its full-year refined production and sales of six metals — platinum, palladium, rhodium, ruthenium, iridium and gold — will fall by about a fifth, with the bulk of the loss coming in the first half.
Amplats expects full-year earnings before interest, tax, depreciation and amortisation (ebitda) to be about R18bn lower at current spot prices than it had been planning for, said Craig Miller, finance director. Amplats posted a record ebitda of R30bn for 2019.
The company has not yet started talking to companies such as Impala Platinum and Sibanye-Stillwater, the two PGM refiners in SA and, potentially, those abroad, Miller said, but it is unclear how much spare capacity was available.
Asked about refineries in Europe and the US, Griffith said: “Generally, they are too small and they’re not really configured for the metal we have. Clearly, Gary [Humphries] will, over the next few days, be calling everybody, from [those with] a blowtorch to a furnace to see if there’s something we can do and get help with.”
Gary Humphries, the executive head of processing at Amplats, is overseeing the repairs to the plants.
Metals shortage
In a market struggling with a shortage of palladium and rhodium to make anti-pollution devices for petrol engines, the news from Amplats of the failure of the plant in front of its refineries could not have come at a worse time.
Amplats lowered its refined metal forecast for the six metals in the suite of PGM it produces by 900,000oz to a range of 3.3-million ounces to 3.8-million. It would take two years to catch up the refining of all the metal stockpiled ahead of the refineries, Griffith said.
First-half output of the six metals is forecast to be in a range of 850,000 ounces to 1.05-million.
Amplats lowered its full-year refined palladium target by 300,000oz to a range of 1.1-million and 1.2-million ounces. Amplats makes up about a quarter of SA’s annual palladium output, which is the second-largest behind Russia. SA accounts for 2.65-million of global mined supply of 6.9-million ounces.
Platinum output was lowered by 500,000oz to a range of 1.5-million and 1.7-million ounces. SA generates about 4.4-million out of the 6-million ounces global mined supply.
Rhodium output for the year would be between 250,000oz and 350,000oz, Amplats said, without providing a previous target. SA accounts for 621,000 of the world’s 746,000oz of mined supply.
Griffith, who is credited with turning the company around, restructuring and selling deep-level, labour-intensive mines, resigned unexpectedly in February. His replacement is Natascha Viljoen, who headed Anglo American’s processing division for six years, and before that worked at then-world number three platinum miner Lonmin at its processing division, where she won acclaim for stopping the difficulties that company had with its smelters.
Viljoen will take over on April 1, said Griffith, adding that she is working closely with the teams on the repairs. “It will ensure we are all linked up and tied up and ensure that in the hand over to come, Natascha is 100% up to speed,” he said.
In afternoon trade on Friday, Amplats’ share price was down 8.42% to R1,012.90.
Update: March 6 2020
This article has been updated with comment, as well as output and financial information.
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