Amplats slashes capex, lowers 2012 output

[miningmx.com] – ANGLO American Platinum (Amplats) slashed its
capital expenditure budget and passed the interim dividend in an effort to shore up
its balance sheet amid a further deterioration in market conditions.

It also adjusted its refined platinum production target for the 2012 financial year
from the previously adjusted maximum of 2.6 million ounces to 2.5 million oz.

Shares in Amplats were relatively untroubled on the JSE in early morning trade as
the company’s distress had been well known to the market, and thrown into relief
last week by the immediate resignation of its CEO, Neville Nicolau.

As guided last week, interim headline earnings came in 78% lower at R713m, while
cash operating profits increased 11% to R14,478 per equivalent refined platinum
ounce. As a result of cost-cutting measures, Amplats said full-year costs would be
restricted to about R15,000 per refined platinum ounce; an 11% year-on-year
increase if its cost targets materialise.

But it was Amplats’ efforts at balance-sheet preservation that will catch the eye,
with capital expenditure reined in a further R700m to R7.3bn. This follows a R1bn
cut in its capital expenditure budget for 2012 to R8bn.

Net debt increased to R9.54bn from R3.66bn as registered at the end of the previous
financial year; a deterioration in the balance sheet which took gearing to 19% from
11% previously. However, Amplats pointed out that gearing still compared well to
the 56% gearing during the economic crisis of 2008.

The group, in which UK-listed diversified mining group Anglo American has an 80%
stake, also unveiled a swathe of cost-cutting and efficiency measures, serving notice
that its portfolio review announced earlier this year was gaining traction.

Head office overheads would be reviewed while its operational review, due to be
completed at its financial year-end, would be augmented by short-term
interventions, of which the joint decision to mothball the Marikana mine, held in
joint venture with Aquarius Platinum, is one.

“We are engaging with our joint venture partners and reviewing all options for the
balance of our joint venture portfolio,’ Amplats said in a statement to the JSE this
morning. “It is an imperative to review current ways of working, and ensure that the
organisation is best structured for the future,’ it said elsewhere in its statement.

The group’s marketing efforts would also be reviewed with a proposal to install new
contracts that better serves offtake partners.

More broadly, further joint interventions with the South African platinum industry,
under the auspices of the joint industry and Government think-tank, MIGDETT, were
also being considered, Amplats said. Mines minister Susan Shabangu said in June
that MIGDETT had called the platinum industry to discuss means of reducing costs
without providing details of steps that could be taken.

For all the gloom, Amplats said it remained positive on the medium- to long-term
prospects for the platinum group metals industry, especially platinum.

“While the market may be in surplus in the short term, we believe that global
demand growth will not be matched by supply growth, with material deficits likely in
the medium to long term,’ it said.

It also remained positive on discussions with the Zimbabwean government on
proposals to sell control of the asset. Significant progress with the Zimbabwean
government had been achieved, it said.

Discussions with the South African government were also underway regarding the
incorrect awarding of mineral rights to third parties, Amplats said without disclosing
the actual disputes.