RBPlat agrees new payment terms with Amplats for PGM concentrate supply

Macro image of a one ounce Palladium bar

ROYAL Bafokeng Platinum (RBPlat) headed off a significant working capital build-up after agreeing new payment terms with Anglo American Platinum (Amplats) to which it supplies platinum group metals (PGMs) for refining.

This was after the parties today agreed new payment terms for PGMs supplied to Amplats in the wake of a failure of Amplats’ Rustenburg processing facilities this month. The failure led to the declaration of a force majeure by Amplats to its suppliers.

The new deal sees Amplats continue to receive concentrate from RBPlat which will be paid a portion of the fees normally due.

This new agreement applies to concentrate supplied to Amplats from March 6. Concentrate supplied before that date is subject to full payment. In addition, the portion of the payment for which Amplats has not been paid has to be completed by April 30, 2021.

“The board sees this as an acceptable arrangement during the period of the event and is pleased with the commitment demonstrated by Amplats and RPM to the partnership with RBPlat and to mitigate the impact of the claimed force majeure,” said RBPlat in an announcement to the JSE News Service.

The agreement is another example of practical mitigation of the Rustenburg processing facilities failure which began with an explosion of one unit in February, and was followed by the risk of a second explosion at the second, back-up unit.

On March 17, Sibanye-Stillwater announced it would shift the majority of concentrate it supplied to Amplats to its Marikana facilities.

Amplats anticipates that it will begin to process concentrate inventory built up from its own mines, and those of suppliers in about 80 days from the beginning of March. That is when repairs to the back-up refining facility are due to be completed. The facilities affected by the explosion could take until the second quarter of next year to complete.

The estimate is that Amplats will produce some 900,000 ounces less of PGMs than guided for the 2020 financial year. This includes a large portion of palladium as well as some rhodium which is heavily under-supplied to the autocatalyst market where it is used to control exhaust emissions.

The impact on Amplats of the force majeure event is significant.

Even before this agreement with RBPlat today – in which it will part pay for concentrate it is not able to refine and sell – Amplats will suffer a hit to earnings before interest, depreciation and amortisation of some R18bn ($1.1bn) for the full year, and R24bn or $1.6bn at the half-year before mitigation takes place.