Amplats walks loadshedding tightrope as fires up refurbished Polowane smelter

ANGLO American Platinum (Amplats) is walking a tightrope as it commissions its newly rebuilt Polokwane smelter this month owing to increased loadshedding by Eskom.

Natascha Viljoen, CEO of Amplats said that while the commissioning of the smelter increased the company’s baseload against which to offset curtailments, it also had less flexibility in how it manages energy consumption at its other assets.

As an intensive energy user, the company operates on the basis of load curtailment rather than timed power cuts as per non-industrial loadshedding requirements. The equivalent stage 4 loadshedding requires a load curtailment of about 20% in terms of National Energy Regulator of SA regulations.

At higher levels of loadshedding intensive energy users are required to cut essential operations which can include refining or saleable production.

Viljoen said Amplats had lost a further 50,000 ounces owing to the most recent curtailments taking inventory levels to about 105,000 oz of platinum group metals over the last two quarters, and that the impact of curtailments could worsen.

“In the last weeks there is more [curtailment] than what we have flexibility in system for and have seen more of an impact on the operations,” said Viljoen. “If we look at last week, we have had to stop Mogalakwena”, referring to the firm’s flagship mine.

“We’ve not been at stage 5 or 6 (as per non-industrial users) but it has been quite meaningful,” said Amplats CFO Craig Miller.

Amplats has cut production guidance for the next two years partly owing to loadshedding but also citing a number of other factors such as procurement difficulties.

Refined PGM production for 2023 will be 3.6 to four million oz compared to a previous estimate of 3.8 to 4.2 million oz. For 2024, it has forecast refined PGM output of 3.6 to four million oz – potentially up to 500,000 oz less than the upper end of previous 2024 guidance of 4.1 to 4.5 million.

The lower production means an increase in Amplats’ cost estimates. For 2022, cost guidance was already adjusted upwards to R15,300 per PGM oz from R14,000 to R15,000 per PGM oz. But for 2023, cost guidance is R16,800 to R17,800 per PGM oz – an increase year-on-year of as much as 16.3%, assuming upper end of guidance.

Power curtailment as well as the refurbishment of the Polokwane smelter and lower expected grades from Mogalakwena has resulted in an inventory build of about 350,000 oz worth about R7bn in earnings before interest, tax, depreciation and amortissation assuming current spot prices.