Amplats pays R900m dividend as five-year strategy bears fruit


ANGLO American Platinum (Amplats) placed the cherry atop its painful five-year restructuring strategy by paying a R900m dividend – equal to R3.49/share – a development that bodes well for a bumper payout from 70% shareholder, Anglo American. Anglo is scheduled to post its year-end figures on Thursday (February 22).

The payout was equal to a 1% dividend yield at the share’s previous close. The last time Amplats announced a dividend was in its 2011 financial year (paid in 2012).

Most of the metrics were good for Amplats’s full-year numbers ended December 31 published today. Platinum group metal (PGM) production came in at five million ounces, slightly higher than in the 2016 financial year whilst free cash flow from operations was R200m higher at R2.4bn, a performance driven by strong unit cost control. Unit costs were reduced 2% to R19,203 per platinum ounce.

The outcome for the year was share earnings of 741 cents compared to 241c previously and headline share earnings were R14.82 c/share. However, the driving catalyst for the dividend resumption was the manner in which Amplats balance sheet had been strengthened. Partly the function of asset sales, the company took net debt down to R1.8bn from R7.3bn previously.

During the period under review, Amplats disposed of its stake in the Pandora joint venture with Lonmin whilst securing control of the Baobab concentrator for three years; it also sold for R400m the Union mine and placed Bokoni Platinum Mines on care and maintenance. A year earlier, it sold Rustenburg Platinum Mines to Sibanye-Stillwater. All in all, some 470,000 platinum of loss-making production had been shifted out of the group since 2012.

“The hard work of the past five years has enabled us to today announced that we have reintroduced the dividend, establishing a pay-out ratio of 30% of headline earnings,” said Chris Griffith, CEO of Amplats, in notes to the firm’s published results.

Interestingly, the company said it would look at short-dated growth and replacement projects. “We will maintain strict capital allocation discipline whilst considering value enhancing quick payback projects, and continue to progress the project studies at our world class assets,” the company said.

“Studies are currently underway to assess future potential projects at Mogalakwena and Der Brochen,” said Amplats of its two flagship operating mines.

Responding to a question at a media conference this morning, Amplats CFO, Ian Botha, said it was important for the company to maintain tight capital control notwithstanding the interest in projects. “Our first priority was to restore the balance sheet as this would give us a strong competitive advantage. We have that now.

“We have confidence in our underlying cash generation and we are comfortable with our balance sheet, so now we are looking at growth projects at both Der Brocken and Mogalakwena from end-2019. We are also looking at additional dividends above our base. if in the context of that we have a strengthening of the balance sheet we are comfortable with that,” he said.

Despite cut-back in production over the year, Amplats said it had targeted PGM production in the current 2018 financial year of between 4.75 million oz to five million oz whilst platinum production would be between 2.3 and 2.4 million oz. Refined production and sales would be in line with the production numbers.

“Overall a strong set of results,” said Goldman Sachs in a morning note. “Guidance [was] a bit lacklustre – production down year-on-year, costs and capex up,” it said. “Expect the stock to move up … especially given the macro newsflow around South Africa,” it added.


  1. Dear fellow Readers,

    As part of the prelude to the review of Anglo on 22/02/2016, I hereby wish to prefer my opinion on its subsidiary Amplats results :


    1. Mogalakwena Mine is a >1Moz/yr PGM producer. There is still plenty of room for improvement because full-Orebody potential is 600Koz/yr Pt ( thus ± 1,4Moz/yr PGM) as per parent Anglo CEO!
    2. Balance Sheet is super strong with Liquidity at R26,5Bn (available facilities=R17,4Bn + cash=R9,11Bn) with a cash pile up R3,66Bn y/y.
    3. Mined PGM prodn at 2,98Moz ( FY12 :2,41Moz) on a constant portfolio basis , thus up 24% since the new sheriffs arrived at 55Marshal street.
    4. On same constant asset portfolio basis, CAGR = 14% OpEx escalation. More an RSA ( mainly administered prices (Elec) etc) phenomena than Amplats issue. This costs escalation are demoralising and require extraordinary, if not impossible, productivity measures to negate.
    5. Amplats provides a case study on how a strong balance sheet , coupled with asset optionality, can enable a mining co. weather any storm even after taking cognisance of the R12,5Bn rights issue in 2010 to bolster the capital structure.

    Net OCF was R13,1Bn ( FY16:R11,4bn) with SIB-CapEx of ±R5Bn is reasonable at this point of the cycle. Just for nostalgia, Net OCF of FY11 was $1672M ( ± R22,3Bn in FY17 R/$ )….Whoa! More impressive from FY17 is that liquidity is plentiful at R26,5Bn. ND:EBITDA analysis is meaningless when you have such strong liquidity. Given the cash at >R9bn, Amplats is now in a strong position to make bolder strategic moves , most appealing being consolidating the Northern Limp for itself.

    Well Mr Market has noticed such a strong financial performance, because MCap is ±R95Bn from a low of R45Bn at beginning of CY16 still a longway from MCap= ±R380Bn reached 10 yrs ago. As I have said before, PGM miners have been “dogs with fleas” for last while BUT smart money is already aboard this sector. Frankly, everybody is starting to see glaring misguided consumer proposition in Elon Musk & gang’s EV scam. The whole EV narrative will fold soonest Tesla hits the wall when the prop-up funds dry-up. Those who disagree MUST tell me where I can re-charge a Tesla car is Ventersdorp! NAMHLANJE!VANDAG!

    So PGM’s are here to stay, and the greenies must just assist us by demanding higher vehicle emission standards.


    Before readers fall for the narrative peddled by Anglo & Amplats management about the success of their “productivity improvements” and “70% of AAP being within 2nd quartile” , consider the following history. By end of FY12 , Amplats inherent profitable production capacity/potential was 3,8Moz/yr Pt after spending some > R80bn since when production was 2,45Moz Pt in FY02. Think about that…..>R80bn for additional 1,35Moz Pt…That’s the scale of Capital Misallocation by Barry Davidson & his side-kick Dorian Emmett in the main. The project CapEx to 3,5Moz/yr Pt was budgeted at R22bn in FY02. The 3,5 Moz/yr Pt target was supposed to have been attained in FY06, and trust me it has NEVER, and chances are never will, been achieved as of report date (FY17) BUT the CapEx money, and more, has been spend. So when the Ausies took over management at Anglo, readers can appreciate the lack of appetite for re-investing in mining leases that were due( Union ; RPM etc).

    Therefore , if we remove the disposed assets ( RPM = 0,6Moz etc) using their FY12 production , we get production potential of 3,2Moz/yr Pt. Now suddenly, the 2,3Moz looks rather tame even with Twickenham(180koz/yr Pt) on C&M. Worrying, on a constant portfolio basis, is FY12 OpEx= ±R28bn which has been escalating y/y to now FY17 OpEx=±R52,5Bn , thus CAGR = 14%. However, on a US$ basis, its FY12 OpEx =$4909M compared to FY17 OpEx= $3862M…so expect those snake-oil sales men at Anglo to blow their own trumpet by claiming credit to have removed >±US$1Bn ( yes, ONE BILLION OF UNITED STATES OF AMERICA DOLLARS) through their “Productivity Initiatives” or “Operating Model”!

    In a nutshell, the Anglo chaps “productivity” measures/fantasies/initiatives have yet to germinate let alone deliver the fruits. Any successful productivity program needs to reduce OpEx costs on an operating currency basis NOT translated via forex. What has been happening is that AAP ops are now being increasingly operated close to nameplate capacities etc which is NOTHING extraordinary!

    AAP management chaps are used to being sloppy & lazy. The list is long of failed production managers from AAP. I can name outgoing CEO of Lonmin , AGA EVP of RSA Ops , SGL RSA Ops Exec amongst the many who just don’t cut it because of bad habits learned at AAP.

    Overall, these were good results. I hope the current CEO of AAP is learning something from Mark & co instead of trying to emulate his erstwhile bosses when he was a project manager for BRPM…