ANGLO American Platinum (Amplats) has continued its strategic repositioning campaign through buying partner Glencore’s 39% stake in the Mototolo joint venture which opens up future development of the group’s adjacent Der Brochen resource.
The financial terms are complex, but Amplats puts the net present value (NPV) of the deal at R1.5bn which takes its overall stake in Mototolo to 89%. According to CEO, Chris Griffith, the deal is key to the future development of the adjacent Der Brochen resource which Amplats wholly-owns.
Griffith commented: “Project studies are underway to assess the most valuable options which could include both replacement and growth options, creating a major platinum group metal (PGM) hub for the company. By combining the Mototolo JV area with the down-dip and adjacent Der Brochen resource, the life-of-mine (LOM) is also significantly extended from the current five year LOM to beyond a thirty year LOM”.
Griffith said it was too early at this stage to provide details on the timing and the scale of any development at Der Brochen because the group was still assessing other possible projects which could be tackled first, in particular at Mogalakwena.
He said “project opportunity studies” had indicated that a third concentrator expansion at Mogalakwena “… will significantly improve the NPV of the asset”. He added optimal value would be achieved through building a concentrator with a capacity of nine million tonnes (Mt) to 12Mt a year which would add around 270,000 ounces of palladium and around 250,000 oz of platinum to the mine’s output.
“The concept and prefeasibility studies have commenced and the capital expenditure will be quantified once the project studies have advanced further,” Griffith added.
Amplats’ interim results for the six months to June show the group is reaping the benefits of the past five years of painful restructuring as profits jumped in the six months to end-June and an interim dividend of 374c a share was declared.
While the platinum price has remained depressed revenues were boosted by increases in the price of by-products – in particular palladium and rhodium – which pushed up the basket price received by Amplats for its PGM production by 26% in dollar terms. The strength of the rand against the US dollar lowered the increase in rand terms to 18% year-on-year.
Amplats’ metrics improved across the board with PGM production for the six months rising to 2.6 million oz (previous comparable six months – 2.48 m oz) while the group returned to a positive net cash position of R0.5bn after being R1.8bn in the red previously. That was thanks to the generation of R1.3bn in free cash from operations compared with a cash burn of R1bn in the previous comparable six months. Amplats has declared an interim dividend of 374 cents per shares (nil).
Despite this, some initial analyst response was muted with Goldman Sachs describing the results as ‘neutral’ and pointing out the Mototolo acquisition would reduce “… expectations of a special dividend which had increased post the recent asset sales”.
Griffith said Amplats’ portfolio restructuring over the past five years was now “… essentially complete and has simplified and improved the business by reducing its operating mines from eighteen to seven, decreased overheads by 50% and headcount by 60% whilst maintaining PGM production”.
He pointed out that 70% of Amplats’ production was now positioned in the first half of the primary industry cost curve while the balance sheet had been de-levered with net debt dropping to R0.5bn from R14.8bn in 2014.
The division which is not yet in the bottom half of the industry cost curve is Amandelbult but two projects are underway which are intended to drop AISC (all-in sustaining costs) at the operation and move it into the bottom-half by 2022.
