Platinum group metals (PGMs) miner Anglo American Platinum (Amplats) cut its full-year dividend payout by R50bn after its profit for the 12 months to end-December plunged 38% as high costs and lower volumes ate into the group’s bottom line.
The miner said it will pay out R115 a share, or R30bn to shareholders, from R300, or R80bn, the previous year.
A slight easing of PGM basket prices, high costs and a 26% drop in sales volumes cut headline earnings to R48bn from last year’s R79bn, the company announced in its annual results released on Monday.
The group said it had to contend with macroeconomic challenges, supply chain disruptions, unrest and electricity load curtailment, as well as some operational headwinds.
Amplats, valued at R296.7bn on the JSE, reported that its total refined production for the year was down 25% to 3.8-million PGM ounces, affected by the delay in the completion of the Polokwane smelter rebuild. Refined production guidance for 2023 is between 3.6-million and 4-million PGM ounces.
The delay, outgoing CEO Natascha Viljoen said, was due to the delivery of substandard materials, which highlighted “the need for increased focus on supply chain reliability”.
The impact of load curtailment that flowed through to final production last year was about 30,000oz refined ounces, Viljoen told Business Day.
“Important to consider that by the time [the product] flows through we have already made a number of upstream plans to mitigate the impact of the curtailment. We have definitely seen an increase in curtailment since the end of last year and just in the last week again load-shedding has been at high levels.”
Load curtailment is when Eskom asks large energy users such as mines to reduce their power usage. It has four levels, which require users to decrease usage by between 10% and 20%. When SA moves to level 6 load-shedding, mines are moved to load curtailment level 4, which is a 20% reduction in load.
Viljoen said Amplats has run some scenarios to estimate the impact of power supply disruptions this year.
One such scenario assumes curtailment on level 4 for one day a week and at level 2 for two days, so in total on about 150 days of the year.
“That will impact our refined production after all the mitigation we have put in place by 5%.”
Given its refined production guidance for the year, such a scenario could, at the upper end, curb output by 200,000oz.
Through effective public-private partnerships the government, Viljoen said, will be able to implement the energy action plan, which aims to reduce load-shedding over the next 18 months and end it over the medium term.
“We are very involved in various business forums to engage with the government and drive for the execution of the plan. We’ve seen movements in regulation and policy already that is really helpful.”
But, she said, there needs to be an urgent response to target criminal activity in the country, and the government and law enforcement agencies need to “bring the rule of law back to where we need it to be.
“This applies not only for mining operations. The impact on Eskom from fraud, corruption and other criminal activity is significant and it can undo the good work that is being done to bring the generation fleet back up to any level of reliability.
“We do have a crisis and this can be best addressed through collaboration between the private and public sector.”
The average PGM dollar basket price was weaker over the year (down 8% to $2,551 per PGM ounce), but a weaker rand boosted the rand price by 2% to a new record of R41,453/oz, Amplats said. However, its profitability was affected by above-inflation cost increases in utilities and consumables.
Input cost inflation for the year was up 11% with prices for some inputs rising 70% while the price of electricity rose 11%.
Deficit
Amplats expects that there could be a small deficit in PGM supply in 2023 given that platinum’s underlying surplus has fallen in recent years as supply has underperformed and autocatalyst demand has improved.
“In 2023, whether it is in surplus or deficit will depend on the direction of investment demand. A return to more historically normal investor inflows would mean it will be in a small deficit.”
It was announced last week that Viljoen, who has headed Amplats for almost three years, has resigned. She will leave after serving a 12-month notice period to join US-based mining company Newmont as COO.
The Amplats share price closed down 1.97% at R1,118.45 on Monday after having already lost a quarter of its value since the beginning of the year.
Updated: February 20 2023
This story has been updated with additional information.
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