Anglo American Platinum’s (Amplats) interim profit plunged about R19bn as total PGM production fell and metal prices declined, leading to the group slashing its half-year dividend by more than four-fifths.
Valued at about R239.2bn on the JSE, the world’s largest primary producer of platinum said in its results for the six months to end-June that net profit fell 70.4% year on year to R7.9bn and headline earnings per share by a similar margin to R29.84.
This comes after a 29.4% fall in the PGM basket price in US dollars to $1,885 per ounce sold, and 15.5% in rand terms to R34,764 after rhodium and palladium prices collapsed.
Total refined PGM production was down 13.2% to 1.7-million ounces, as load curtailment from Eskom affected concentrators and smelters. Load curtailment involves energy-intensive users such as mines reducing their consumption.
The interim dividend was thus reduced from R81 per share to R12.
Only seven months into the year, 2023 has already been SA’s worst year of power cuts. Amplats said the ongoing power crisis in SA was unlikely to be resolved in the near term, and would continue to be a risk, but it should not affect mining operations materially unless it worsens unexpectedly.
According to CEO Natascha Viljoen, even though there has been an increase in load curtailment in the first half of the year, the company has been successful in limiting the impact of power supply disruption on ounces lost.
“We have built about 66,400 ounces of stock that we haven’t processed through the value chain due to our curtailment strategies,” she told reporters on Monday.
But, said Amplats CFO Craig Miller during the group’s results presentation, after experiencing “intense” load-curtailment during April and May, substantially lower levels of curtailment in May and July has put them in a position to revise the estimated impact of power supply constraints on production for the year down from an original estimate of 150,000 to 200,000 ounces to between 120,000 and 150,000 ounces.
This was not only due to less load-curtailment implemented in those two months and a better outlook for the rest of the year, but the company was also learning how to manage the electricity crisis better.
“Because we are part of an intensive users group, we have an opportunity to mitigate how we reduce our power demand and we have built a model to allow us to plan our operational and ultimate production impact carefully. The way we’ve done it, which is also why we have built up some stock, has been to protect the primary production because generally from a safety point of view, but also in terms of catch-up potential, primary production is more difficult to catchup later — if you have lost a blast in mining it is always difficult to make that up,” said Viljoen.
She also addressed concerns about SA suffering a total electricity blackout, saying that while they recognised the risk of such an event occurring was very low, they have developed “a rigorous business continuity plan” to respond to a blackout.
“If there is ever a total blackout we will be able, with backup power, to ensure the safety of our people first and shut down our operations safely in a way that is as effective as possible for us to restart.”
Amplats, as a member of the SA Energy Council, is participating in the process of partnering between business, government and Eskom through the National Energy Crisis Committee (Necom) to solve the electricity crisis as speedily as possible.
“We have done quite a bit in that partnering process with Necom to support Eskom in the areas that really matter. From that point of view we feel encouraged — as South Africans we are all keen to make an impact and to help [solve the energy crisis].”
Amplats is directly involved with some of the workstreams within Necom. A team of engineers from the company was involved in reviewing some of the scheduling for work at Kusile power stations to bring back to service three generation units that were taken offline last year after the collapse of a flue gas desulphurisation duct, Viljoen told Business Day.
The company’s diversified metals are used in the industrial, automotive, technology and battery storage sectors, and in the development of green hydrogen technology to curb harmful emissions.
Amplats’ mining, smelting and refining operations are in SA, and it owns the Unki Platinum Mine and smelter in Zimbabwe.
The plunge in profitability highlights the cyclicality of the mining industry, which is prone to the vagaries of commodity markets. In 2021, PGM miners posted record profits.
But Viljoen is upbeat about the long-term fundamentals of the miner, including its “diverse suite of metals, resources, and operations”.
“One thing that is encouraging is we have seen the automotive market recovering,” she said. Platinum and palladium are important inputs in car manufacturing where they are used in catalytic converters to help reduce vehicle emissions.
According to Amplats’ latest guidance, it will produce 3.6-million to 4-million PGM ounces in its 2023 financial year, the same range as in 2024, and 3.5-million to 3.9-million ounces in 2025.
Viljoen, who is now serving her notice period at the helm of Amplats after resigning last year, said the company has made “good process” in appointing a successor and it expects to make an announcement on a new appointment “imminently”.
With Andries Mahlangu
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