Anglo American Platinum (Amplats) will need to look at how it sequences its biggest growth opportunity as it “cuts our coats to fit the cloth” of sharply lower platinum group metal (PGM) prices, says its new CEO, Craig Miller, but he remains bullish about the outlook for the metals.
With PGM prices down 50% in dollar terms and about 30% in rand terms since the start of 2023, the company is working through how to time the investment in going underground at its giant Mogalakwena mine in Limpopo, which is at present an open pit mine. It has committed R4bn to the exploration and decline work to take the mine underground, and former CEO Natasha Viljoen had said in December that underground mining could start towards the end of 2024.
Miller said the results from the drilling are phenomenal.
“They support that Mogalakwena is a tier-one asset with a very extensive ore body,” he said. But while the underground opportunity is very significant, it isn’t the best deployment of Amplats’ capital just yet, he said. “The transition to underground will take time.”
The group will focus on delivering those options that will create the most value, while retaining optionality for the future when prices recover, said Miller. A priority is to ensure its operations are in the lower half of the cost curve.
Miller was speaking on the sidelines of the Joburg Indaba last week in his first outing as Amplats CEO since he took the helm on October 1, following Viljoen’s resignation in February to take up a post at US giant Newmont Mining.
The company saw earnings decline by almost 70% to R13bn in the six months to end-June, on lower prices and lower production, and prices have continued to slide since then, particularly of palladium and rhodium.
Miller said it was never expected that prices would stay at their record levels, which would not have been good for the industry because it encourages substitution.
Destocking of palladium after stockpiles were built up in 2022 on concerns about Russia sanctions has also driven down prices, as have concerns about the impact of high interest rates on automotive demand.
And the rise in battery electric vehicles has trimmed growth in PGMs’ traditional use in the autocatalysts that clean emissions in internal combustion engine vehicles.
Hydrogen economy
But Miller is upbeat about the longer term for PGMs, especially given their crucial role in the hydrogen economy. Investment in new projects related to hydrogen has increased 75% over the past year, he pointed out.
And he told a panel at the Indaba that if just 10% of future light duty electric vehicles were powered by (hydrogen) fuel cells, this would translate to the total current utilisation of PGMs in the automotive sector. Amplats is also investing to develop new markets for the metals in areas such as computing, food preservation and medical applications.
Miller, 50, comes to the CEO post after four years as Amplats CFO and more than two decades with the Anglo American Group, where he has held posts in iron ore in Brazil, coal in SA and as head of the CEO’s office under Cynthia Carroll, who he credits with instilling an uncompromising approach to safety in the group.
Miller has faced questions about whether as a finance specialist he is the right person for the new job, but he is arguably a “CEO for the season”.
He was Anglo’s group financial controller during the last 2015-16 commodity price downturn. “So I’ve seen the movie, unfortunately, and I’m not really wild about seeing the sequel,” he said last week.
But the group is much better positioned than it was when it had to shed assets to cut its debt and survive the previous downturn, with Amplats itself now sitting on R24bn in cash.
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