World number two platinum group metals (PGMs) supplier Anglo American Platinum (Amplats) rebuilt a plant in the most problematic part of its business this year, allowing it to raise its annual output target for 2021 by a marginal 100,000oz.
Amplats had an explosion at its Anglo Converter Plant (ACP) in early February, followed shortly by dangerous water leaks at its spare ACP in March, forcing its closure for repairs.
Since then there have been running problems with the second plant, leading to its closure again in November.
Amplats had forecast it would generate 4.2-million to 4.7-million ounces of PGMs in 2020. It is now aiming for 2.6-million to 2.7-million ounces, an increase of 100,000oz from a recent forecast.
In all, these disruptions in the ACP segment of its processing pipeline, which prepares material from its concentrators for the refining out of base metals and then the individual PGMs, have taken up to 2-million ounces of refined PGMs out of the global market. Analysts have said the reduction came at a perfect time when there was a resurgence in Covid-19 infections in Europe and the US, which are big car markets and where car manufacturing and sales have slowed.
The three main PGMs — platinum, palladium and rhodium — are mainly used to make anti-pollution devices for petrol and diesel engines.
Amplats on Monday said it expects to sell 2.8-million ounces of PGMs in 2020, drawing down on inventories to meet contracted supplies.
The backlog of concentrate will take two years to work through the system, meaning the miss of 1.6-million to 2-million ounces on its full-year target for 2020 will be recouped and is not entirely lost.
The cost to rebuild the plant was at the lower end of the R500m-R600m estimate Amplats released earlier this year. It took seven months to complete the work.
With the rebuilt ACP unit A, which exploded in February, Amplats will return to full capacity of feedstock into its refineries by the end of 2020.
For companies like Sibanye-Stillwater and Royal Bafokeng Platinum (RBPlat), the return to an uninterrupted process would be a welcomed development because they respectively toll treat or sell their concentrate to Amplats. Toll treatment means paying a fee for the refining of metals that are then returned to be marketed and sold by Sibanye. RBPlat has an offtake agreement with Amplats under which it is paid for deliveries of metals in concentrate less a processing fee and the metal remains within Amplats for marketing and sale.
The rebuild of the converter took place during the strict lockdown conditions from the end of March into May when mining operations were allowed to return to full capacity.
The closure of borders, which impeded the movement of imports to SA, was also a factor for Amplats to overcome.
"We were able to procure and deliver long lead-time items to site six months ahead of schedule, despite the impact of Covid-19 on supply chains, enabling us to bring forward the rebuild to the end of 2020, ahead of our initial expectations of second quarter 2021," said CEO Natascha Viljoen.
Amplats shut ACP unit B in November because of persistent water leaks, which in a high-temperature environment like the converter could result in an explosion.
Amplats would adopt a phased approach to repairing unit B, keeping it nearly ready to operate in case there was a problem with the rebuilt plant. However, the plant would ideally be completely rebuilt at some stage.
"Although ACP phase A has been rebuilt, phase B is scheduled for a large rebuild that may take as long as 12 months. Hence, there will be no redundancy in place should phase A need to be shuttered, presenting material risk to production and supply," SBG analyst Adrian Hammond said in a note.
"Any interruption to phase B is also likely to result in another force majeure, which impacts Amplats’ purchase of concentrate and toll customers. We also expect capex to rise materially to about R9bn in full-year 2021," Hammond said.
Amplats declared a force majeure — a clause in all supply contracts with customers, to allow it to interrupt that supply if an extraordinary event happens — in March when it informed the market of the failures of both converters.
Amplats expects the rebuild of the second plant to be completed in the second half of 2021, with orders in place for all the items that take the longest to deliver. The parts that will take the longest to deliver will arrive on site in the first quarter.
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