Amplats cuts refined PGM target after Polokwane smelter rebuild delayed two months

ANGLO American Platinum (Amplats) has cut its forecast for full year production of refined platinum group metals (PGMs) by up to 700,000 ounces following a delay in the commissioning of its Polokwane smelter rebuild project.

The Anglo American controlled firm said in an announcement today refined output will be between 3.7 to 3.9 million ounces compared to its previous forecast of four million to 4.4 million oz. Sales guidance would similarly adjusted in line with refined production.

There would also be a consequent increase in inventory although Amplats did not provide any details of the capital build. “Work has commenced to find solutions to mitigate the impact on refined production this year,” it said.

Amplats CEO Natascha Viljoen said the company had detected sub-standard materials which had been supplied for the rebuild of the Polokwane smelter. As a result of re-ordering new materials, due to arrive end-October, the rebuild would be completed two months late.

“We will not compromise on safety or quality and therefore defective materials will not be used,” said Viljoen. “We remain committed to ensuring the structural integrity of our Polokwane smelter.” Shares in Amplats fell 3% on the Johanesburg Stock Exchange today.

Amplats said it had not updated its guidance for the 2023 financial year “until further information is available and analysis can be conducted”.

There is no impact to metal-in-concentrate guidance which remained at between 3.9 to 4.3 million oz while unit cost guidance was also undisturbed at R14,000 to R15,000 per PGM ounce.

“All guidance is subject to no disruptions due to load-shedding,” Amplats added. Eskom reinstated stage two loadshedding on Tuesday (September 6) through to Saturday (September 10) as a result of further breakdowns of its coal-fired fleet. Viljoen said in July 2022 refined production would be at risk if Eskom implemented significant power rationing between now and December.

UBS analyst Steven Friedman said the midpoint cut in refined production of about 400,000 oz “in conjunction with other supply disappointments flagged in recent financial results could help support the elevated PGM basket price in the near-term”.

But there were longer term headwinds working against the market; principally the relatively bleak economic outlook for automotive production. Slowing new orders in automotive production “suggests that growth will run out of steam once the existing backlog has been executed, giving rise to concerns about the 2023 outlook,” he said.