Amplats’ reviewing capital plans for 2020 after saying Waterval fix could top R800m

THE cost of fixing Anglo American Platinum’s (Amplats’) Waterval refining facilities in Rustenburg could be as much as R800m of which the majority would be incurred in the 2020 financial year, the group said in a statement today.

As a result the company was reviewing its capital plans for its 2020 financial year with a further update on its full year capital expenditure guidance expected “in due course”. In a week of extraordinary panic selling, shares in the company fell 10% today on the Johannesburg Stock Exchange. Since Friday, the share is a third lower.

Amplats also said metal in concentrate production for 2020 would be at the lower end of revised guidance of 4.2 to 4.6 million ounces. This is the metal Amplats produces from its smelters before it is supplied to the Waterval facilities. Coming in at the low end of guidance is a consequence of agreeing to have some of the metal it would normally toll treat for Sibanye-Stillwater processed at the latter’s Marikana facilities.

Amplats said that over the last two weeks it had come to agreements with all of its suppliers of concentrate in respect of new offtake deals. This is following the group’s shock force majeure statement on March 6 in which it detailed technical failures at both of its Anglo Converter Plant (ACP) units.

As a result of the technical failures, which included an explostion at Phase A unit of the ACP, refined production would be about 900,000 oz lower. It today did not make any adjustments to its refined production guidance of between 3.3 million to 3.8 million oz. Unit cost of production guidance remains between R10,600 – R11,000 per PGM ounce.

The estimated capital expenditure for replacement equipment and repair of ACP Phase B, where water ingress was detected that could have led to an explosion is R150m to R200m, said Amplats. This amount would be incurred in the current year.

The estimated capital expenditure to rebuild Phase A where the explostion occurred will be R500m to R600m, of which R100m is expected to be incurred in 2021, the company said.

“These are incremental capital expenditure amounts to full year guidance previously provided but exclude any potential insurance proceeds,” said Amplats.

In addition to agreeing in principle temporary terms that will allow concentrate to continue to be delivered to the company’s smelters, Amplats will continue to smelt concentrate received at all its four smelter complexes, it said.

“Together with our partners RBPlats, the Modikwa JV and Siyanda, we have established temporarily revised payment terms which allow for delays in payment during the force majeure period,” it said.

“The force majeure protections are such that the company does not foresee any agreements being terminated as a result of this disruption, including the customer prepayment which remains in place,” it said.

Royal Bafokeng Platinum (RBPlat) said on March 18 had had agreed new concentrate offtake terms which 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.

On March 17, Sibanye-Stillwater said it had “largely offset” the impact of breakdowns in  Amplats refining facilities after agreeing to process PGMs previously destined for Amplats at its Marikana operations.

What this means is that instead of supplying PGM concentrate to Amplats in terms of purchase of concentrate deal and a separate toll-treating arrangement, Sibanye-Stillwater will process that material itself.