[miningmx.com] – ANGLO American Platinum (Amplats) said headline earnings for its 2014 financial year would fall to between R650m and R875m owing to the five-and-a-half month strike during the period.
This is a heavier decline that first flagged in a trading statement on December 1 when the group, controlled by Anglo American, estimated a fall of at least R290m whereas the statement today indicates a minimum decline of R576m and a maximum fall of R801m in headline earnings.
However, analysts have been generally optimistic on the future performance of the company saying its turnaround potential was part of a larger operational improvement narrative for Anglo American.
Basic earnings would increase year-on-year to between R495m and R705m compared to a loss in the 2013 financial year of R1.37bn.
The year-on-year improvement in basic earnings included a gain of R243m following the final phase of the refinancing of Atlatsa Resources, in which Amplats has a 49% stake, a R168m impairment, and the scrapping of assets following the closure of Union Mine South decline section totalling R294m.
Amplats, which is due to report is full-year figures on February 9, is expected to provide more details on the proposed sale of its Union mine in Rustenburg which is thought to have attracted about 10 interested bidders.
There will also be interest in preparations the company has made in the sale of its other Rustenburg shafts having recently opened the data room. Amplats said in the past that it hoped to complete the sale from the end of 2015.
The fate of its 49% stake in Atlatsa is also likely to attract attention following speculation over the Christmas period that the Public Investment Corporation, a state-owned asset management firm, would buy the stake for$385m.
The improvement in the performance of Amplats is seen as a differentiating feature of Anglo American’s prospects, according to a recent report by Investec Securities.
Said Investec: “… we hope to see news flow on restructuring/asset sales of non-core assets, such as Rustenburg and Union Platinum mines”.
Standard Bank said negative news flow about the performance of the Rustenburg shafts was already in the share price.
“In our view, Angloplats has most of its negative news flow surrounding Union and Rustenburg already priced into its share price, and any decision regarding the region is likely to be a key positive sentiment change and catalyst for the stock,” it said.
Shares in Amplats are down 13% on a 12-month basis but have improved 22.7% since December 12 when they hit an 18-month low. The improvement in share prices is partly related to expectations that the platinum market will revive somewhat in 2015.
Not all analysts are convinced, however, with Macquarie Research saying that the risks remain “on the downside” for the foreseeable future.
Commenting on South African platinum stocks in general, Macquarie said that “… while share price have declined significantly in recent months … the risks remain heavily skewed to the downside and further downgrades are possible.
“We therefore remain cautious on the sector and maintain our underperform ratings on all the stocks covered except Lonmin which is on a neutral rating,” it said.
