[miningmx.com] – ANGLO American Platinum (Amplats) said it would continue to suspend dividend payments as stay-in-business costs and a rising tide of debt – up nearly 30% in six months – swamped the group’s books.
As of June 31, debt increased to R13.2bn from R10.2bn ended-December highlighting the distress at Amplats which was recently frustrated in its attempts to restructure up to 14,000 jobs and cut production.
Instead the company, in which Anglo American has an 77% stake, is embarking on a phased restructuring programme following pressure from the South African government that it hadn’t been consulted on the original plans. Unions said previously they would oppose any restructuring of the group’s assets.
The higher debt is despite improved operating figures from Amplats in which refined platinum sales increased to 1.1 million ounces owing to a deterioration in the value of the rand against the dollar. Refined platinum production was steady year-on-year while production from Amplat’s own mines fell 2% to 787,000 ounces. Operating costs increased about 5%.
“I believe we could characterise operational performance as strong in a challenging environment,” said Chris Griffith, CEO of Amplats.
Amplats also embarked on austerity measures in which it cut capital expenditure by 22% or R666m to R2.3bn during the period under review.
Operating profit for the group’s mines increased to R1.3bn against a loss of R2.2bn in the previous period, but there was an operating free cash outflow of R411m nonetheless.
The biggest hit to the balance sheet, however, was the sheer cost of sustaining some of the mining operations in Rustenberg which are struggling to make money in the current economic environment. Of capital expenditure of R2.1bn, just over R1bn was stay-in-business capital. The outcome was a net cash outflow for the group of R2.7bn.
Despite this increase, gearing was maintained at around 26%, Amplats said. Shares in Amplats were unchanged on the JSE.
“As a result of this increase in net debt, together with the considerations for future funding requirements and uncertain global economy, the board resolved not to declare an interim dividend,” Amplats said in a statement to the JSE.
Amplats said assets worth up to R2.3bn (post-tax R1.9bn) could be impaired following its revised restructuring programme. It couldn’t, however, quantify the impact of restructuring on reserves and resources at this stage.
Amplats said wage talks were in “early stages” of collecting wage demands. “Anglo American Platinum has received wage demands from AMCU (Association of Mineworkers & Construction Union) and UASA. We expect to start negotiations once the demands are collated,” it said. AMCU has demanded a doubling in wages for entry-level workers.
Restructuring discussions were underway concurrently with unions and the DMR. The section 189 consultations resumed on June 10. “We expect to conclude this 60-day process on 10 August,” Amplats said.
