PGM market laps up Amplats inventory metal but prices weaken in second half of year

ANGLO American Platinum (Amplats) said in a fourth quarter and 12 month production update today that it had all but removed the build-up of ‘work in progress’ metal inventory, reporting full year refined sales of 5.2 million ounces.

This was an 89% year-on-year increase and represented the removal of the company’s metal inventory earlier than anticipated – illustrative of the strength of the platinum group metal (PGM) market.

The inventory had been built following the closure of Amplats’ processing facilities, known as the Anglo Converter Plant A and B. Both plants had to be repaired; in the case of ACP B it was rebuilt and is being commissioned in the current quarter.

Amplats CEO, Natascha Viljoen, said refined production represented an all-time record for the company. “PGMs sales volumes increased by 70% in the quarter due to the increase in refined production, despite rebuilding refined metal inventories to more normal levels following robust demand earlier in the year,” she said.

Amplats reported a 36% improvement in the basket price for its PGMs which averaged $2,761 per oz. The year-on-year increase was largely driven by rhodium which was 87% higher, averaging $19,613/oz. The platinum price was 10% higher, but all PGM prices weakened in the second half of Amplats’ financial year compared to the first half.

For the current financial year, Amplats had guided to metal in concentrate production of 4.1 to 4.5 million oz whilst refined production is expected to be between 4.2 and 4.6 million oz. Unit cost guidance has been given as R13,800 to R14,500 per PGM oz, the equivalent of $900 per PGM oz.

Anglo American

Amplats numbers were part of another reasonable production and price performance by Anglo American which owns 70% of the South African firm. The UK-group’s De Beers reported 10% higher average diamond prices for the 12 months, while Anglo’s copper assets achieved 7% higher average prices against the benchmark.

Outgoing CEO Mark Cutifani said the highlight for 2022 will be first production from Quellaveco, the firm’s $5.2bn copper project in Chile. Quellaveco is expected to produce between 120,000 and 160,000 oz this year and to average 300,000 tons for the first ten years at full production.

According to Jack O’Brien, an analyst for Goldman Sachs Anglo faces risks from the severe drought in Peru. In respect of Chile, where there’s a major drought, Anglo said it had factored in water shortages in the forecast for its Los Bronces mine.

Morgan Stanley said production at most of Anglo’s divisions was marginally below its forecasts, but it added that price realisations across operations, notably in diamonds and lower discounts in metallurgical coal implied a 2% to 4% upside risk to its EBITDA forecast for Anglo.