Ralph Havenstein, CEO designate Norilsk Nickel Intl.
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Anglo Pt accelerates capex
Allan Seccombe
Posted: Mon, 12 Feb 2007

[miningmx.com] -- ANGLO Platinum will spend up to R10bn a year on new and existing mines for the next two to three years, and will look at incurring debt on its balance sheet, freeing up cash for shareholders.

Anglo Platinum took a decision in 2003 to slow its capital expenditure programme to grow production because of the unfavourable rand that cast doubt over the financial viability of some projects, but that has now changed.

“We have seen the balance between the rand and prices which has given us greater confidence in the market and the longer term outlook and we are seeing some acceleration,” CEO Ralph Havenstein said.
seeing some acceleration
Capital expenditure will remain at the forecast 2007 level of between R9bn and R10bn for two or three more years to maintain the company’s production growth plans of five percent a year, he said. It will produce between 2.8m and 2.9m oz in 2007.

“It affirms our confidence in the PGM market as well as the South African mining market,” he said.

Barnard Jacobs Mellet’s Henk de Hoop, the country’s leading platinum analyst, said Anglo Platinum had incurred debt in recent years and it should, in the current high platinum price environment, be able to take on more debt to free up cash for shareholders.

Anglo Platinum paid a final dividend of R39, bringing its total dividend for the year to R53 per share.

Its cash position has switched from debt of R2.3bn to a positive R4bn, this after paying capital expenditure of R6.5bn in 2006 and dividends of R4.85bn out of R18.4bn in cash generation.

Norman Mbazima, the finance director said the company’s confidence in the short-term price had in turn given it greater certainty about its capital expenditure patterns.

“Starting with this dividend, we will start to put some debt on the balance sheet,” Mbazima said.

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Shareholders have the option to take up to 50% of their dividends in the form of shares, something widely interpreted as allowing Anglo American, which owns 75.4% of Anglo Platinum, to creep up on its ownership of the company.

“It’s a way for Anglo to up its shareholding. Anglo does not need the cash,” said Nigel Suliaman, a fund manager with Metropolitan Asset Management.

Havenstein said Anglo had given its support to the 50:50 dividend option.

“It means R20 of the final dividend of R39 will stay on Anglo Platinum’s balance sheet. If this process continues, over time Anglo would take full control. It’s a way of doing it with low transaction risk,” said Hugo Nelson from Coronation Fund Managers.

Havenstein said Anglo Platinum would be happy with a long-term platinum price of $800 to $900/oz. It is currently around $1,189/oz.

“We are nervous about the palladium price where it is now at around $330/oz. We would feel more comfortable with a price closer to $200 to $250, which would be more reasonable,” he said.

Anglo Platinum has always aimed to keep its costs in line with inflation as measured by consumer price inflation, but it has proved nearly impossible to hit that target. The coming year is going to be no different.

“In the present mining environment, the aspiration of keeping costs in line with CPI will be more difficult than ever before. Cost pressures are increasing in the mining industry, both from the more volatile labour market in 2007 and scarce skills and project executive capability in South Africa,” Havenstein said.