ANGLO American Platinum (Amplats) said metal production for its 2016 financial year would be up to 100,000 platinum ounces lower than 2.3 to 2.4 million oz forecast following a furnace leak at its Waterval facilities which would require a R125m, three to four month rebuild.
It was not possible to recover the production as the group’s other smelters were operating at full tilt, the company said in an announcement today. The affected facility, Waterval furnance number one, accounts for about 20% of Amplats’ smelting capacity, it said.
“A preliminary assessment of the damage to the furnace has shown that a rebuild of the furnace should be brought forward as the most prudent means of mitigating future potential operational risks,” Amplats said.
“While the extent of the damage to the furnace has yet to be fully quantified, early indications are that the rebuild, and associated production ramp-up, is likely to take approximately three to four months to complete,” it said.
“As a result, platinum production for the 2016 financial year is expected to be impacted by between 70,000 and 100,000 platinum ounces,” it added.
A leak of molten furnace matte was discovered at Waterval furnace number one’s hearth on September 10 which required staff to stop the unit. No-one was injured in the event.
Amplats said there would be a build-up of concentrate stocks during the rebuild period which would be released as refined metal in the future.
The cost of the furnace rebuild would take total capital expenditure for the year to reach the upper end of Amplats’ guided range of R4bn. It guided for between R3.5bn and R4bn.
“The company’s mining and concentrating activities are unaffected, therefore not impacting the previously guided range of produced (metal in concentrate) of 2.3-2.4 million platinum ounces,” it said.
“Shareholders and key stakeholders will be kept updated on the progress of the rebuilding of the furnace and associated impacts,” said Amplats.
The impact to Amplats’ earnings has been estimated at between 2% to 4% described by BMO Capital Markets as “very limited”. However, the disruption could spill into Amplats’ 2017 financial year, it added.
It did question though if Amplats’ cost-cutting drive and maximise utilisation of assets may have resulted in some of its maintenance schedules to be stretched.
“Whilst the impact appears relatively small, there may be some questions around whether the company’s effort to minimize costs and maximize capacity utilisation is resulting in the maintenance schedules being stretched,” it said.
“However, the Waterval No. 1 smelter was last rebuilt about nine years ago and was approaching its next scheduled rebuild, so remained on schedule until the run-out,” BMO Capital Markets added.
Shares in Amplats were down only 1.3% on the Johannesburg Stock Exchange whilst Anglo American, which owns about 80% of the company was just under 2% down.
The price of platinum was largely unaffected by the news; in fact, it was down about $7 per ounce with bids coming in at $1,045oz, a decline of 0.63%.
