Anglo American Platinum (Amplats) has warned that its half-year profit is likely to plunge by as much as R20bn on weak metal prices and lower production — further evidence that the taxman will collect less from the mining industry.
Amplats, the world’s largest primary producer of platinum, accounting for nearly 40% of global annual supply, said on Monday its profit for the six months to end-June would probably come in 75% lower.
The company, valued at R240bn on the JSE, said it would report an interim profit of R6.7bn-R9.4bn, way less than the R26.7bn profit it reported in the six months to June 2022.
The group is expected to release its interim results next Monday. News of the plunge in half-year profit bodes ill for the SA Revenue Service and the government, which will receive less in tax and royalties.
Amplats paid R12.7bn in corporate income tax in 2022, according to its annual report, and a further R4.2bn in royalties. The company’s shareholders, who received R30bn in dividends in the past financial year, are also likely to get much less.
A report by RMB Morgan Stanley released earlier in July painted a gloomy picture of tax collection in the mining industry this year. It looked at data collected from 15 mining companies representing the majority of corporate taxpaying entities from the sector.
The report concluded that the tax take from SA’s mining companies is estimated to halve to R50bn in 2023 at current spot prices, compared to 2021 when the country collected R110bn in corporate taxes and royalties from mining firms.
Amplats said its profit plunge is due to weak metal prices and lower output forced by load curtailment from Eskom.
The average platinum group metals (PGM) basket price was lower after rhodium and palladium prices collapsed 47% and 29%, respectively, far outweighing the positive impact of a weaker rand, which declined 15% against the dollar on average over the same period.
Rhodium is hovering at $4,350/oz, having normalised from dizzy heights of nearly $30,000/oz in May 2021 when Covid-19 snarl-ups and reopening of the global economy stoked a supply-demand imbalance.
“There are SA-specific issues which might have contributed to a bigger miss on guided earnings than before,” Gryphon Asset Management portfolio manager Casparus Treurnicht said, citing load-shedding and other associated infrastructural bottlenecks.
“It is remarkable that the PGM basket price is now below the pre-Covid price,” he said.
Amplats and its peer group are largely price-takers in a cyclical and unpredictable commodity market, which largely feeds off the global economy.
The platinum price is yet to respond to production supply disruptions caused by load-shedding. SA accounts for the lion’s share of output of the world’s PGMs, which are mainly used to curb harmful emissions in internal combustion engines, as well as making jewellery.
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PGM production has been in steady decline so far in 2023, according to Stats SA. The latest mining production data released last week by the statistics agency showed PGM production fell 7.2% in May.
Annual maintenance and Eskom’s load curtailment hampered Amplats’ production during the reporting period, resulting in about 66,400 PGM ounces in deferred production.
Amplats’ sales volumes also contracted 12% year on year due to lower refined production after its Polokwane smelter needed to be ramped up in January after its rebuild.
Mandi Dungwa, portfolio manager at Camissa Asset Management, said Amplats continues to generate cash at current commodity prices, while spending more on its operations. She singled out Mogalakwena mine where the company was “evaluating options to expand production from one of the lowest cost mines in the industry and firmly cementing Amplats as a low-cost PGM producer”.
Amplats shares have been under huge pressure on the JSE along with its peers amid the precipitous decline in PGM prices, compounded by the fallout of the unreliable electricity supply.
Its shares were down 2.50% to R897.36 in late afternoon trade on Monday, pushing year-to-date losses to nearly 40%.
With Thuletho Zwane
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