Send this article to a friend
Print this page

» AngloGold to shed 400k oz in 2008
» Eskom to pressure DME on licenses
» SA coal given months to end supply crisis
» Eskom sets mines 10% reduction target
» Eskom forces SA mines to stop mining

» JSE:ANGLO PLATINUM LIMITED:
123200c 1%

Anglo Platinum output to fall further in 2008
Allan Seccombe
Posted: Mon, 11 Feb 2008

[miningmx.com] -- IN an all too familiar refrain from the South African mining industry, Anglo Platinum is forecasting a decline in production for 2008 to 2.4 million oz because of the power crisis affecting the country. The news drove the platinum price to an all-time high of $1,900/oz.

Anglo Platinum reported a six percent fall in platinum production to 2.47 million oz for 2007 and a 12% reduction in refined platinum to 2.47 million oz. It said an ongoing push to improve safety would again be felt this year as would the power supply problems at state power utility Eskom.

“The new approach to safety, alongside the operational difficulties, has had a material impact in 2007, which is likely to continue in 2008,” said joint acting CEO Duncan Wanblad.
inability to supply sufficient power
“Production disruptions arising from Eskom’s inability to supply sufficient power have been experienced in 2008. Consequently refined platinum production is expected to be 2.4 million ounces,” he said.

The platinum market is unlikely to react well to the news, there being fears of a growing supply deficit from South Africa, the world’s leading producer of the metal used to make autocatalysts and jewellery. Platinum prices hit a record high of $1,900/oz -- the eighth peak in eight trading days in a row -- on Monday because of deficit concerns.

Eskom’s request that its major customers must cut power usage by 10% has prompted a wave of warnings from the mining industry of lower production and potential job cuts and shaft closures.

Anglo Platinum estimates the loss of platinum production this year directly related to Eskom at its own mines and its joint venture projects to be 120,000 oz. It has added another 30,000 oz to that estimate because Eskom's force majeure declaration on 25 January that effectively shut the country's mines down for a week.

These two forecasts offset additional production of 130,000 oz this year from projects like Kroondal, Wanblad said.

Worryingly for the market, Anglo Platinum is unable to give a production forecast for 2009 and 2010 and advised the market to discard the previously used metric of using 5% growth a year, he said.

"The five percent metric is not going to work. We are unable to forecast how 2009 and 2010 will look because of the Eskom situation."

Anglo Platinum is concerned about the effect of the price spike in platinum because of South African supply concerns, said Norman Mbazima, a joint acting CEO.

"We are all starting to get worried at this high level... we are concerned that jewellery will have to give up a fair bit of metal in 2008 because of these high prices," he said at a results presentation. "We hope that will not be permanent."

Autocatalyst makers take a longer view of platinum prices, but buying has been reduced in the current market, he said.

Anglo Platinum, announcing its full-year results on Monday, said output had fallen six percent in 2007 because of “reduced labour efficiency and interventions aimed at achieving a significant improvement in employee safety.”

Click Here to subscribe to our daily newsletter
“The reduction in refined ounces, also to 2.47 million ounces, was a 12% decrease due to reduced mining output and movements in process pipeline stocks.

The price of platinum group metals offset the decline in refined ounces and the world’s largest platinum producer reported record headline earnings of R12.3bn. Headline earnings strip out exceptional items. Anglo Platinum declared a final dividend of R23 per share, bringing the full-year dividend to R52.

“Anglo Platinum remains confident of continued robust demand for platinum and is committed to increasing production in line with growth in global demand,” Wanblad said.

The board has approved new capital expenditure of R10.7bn to maintain existing and develop extra production capacity, he added. Another R5.9bn has been allocated to expanding the Twickenham mine’s output. Twickenham will produce 180,000 platinum ounces once it is in steady state output in 2016.