ANGLO American Platinum (Amplats) announced a restructuring review across its operating base potentially affecting 3,700 fixed term employees as well as 620 contracting companies.
The move comes amid a 35% decline in average platinum group metal (PGM) prices last year which resulted in a 71% year-on-year fall in headline share earnings for the 12 months ended December to R53.30/share, announced on Monday. Amplats’ full year results are lower than consensus of R60.15/share.
Amplats, owned 79% by Anglo American, said it had issued a Section 189 notice in terms of South Africa’s Labour Relations Act. The potential restructuring affects 17% of Amplats’ total 22,000 full time employees.
In December, Amplats announced plans to save R10bn in annual costs of which R5bn were in operating costs. As part of this proposal, the group guided to cash operating costs of R16,500 to R17,500 per PGM oz. This target compares to R17,859/PGM oz in 2023 cash operating costs, a 16% year-on-year decline. All-in sustaining costs (AISC) of $1,050/oz were also targeted compared to $1,136/PGM oz (excluding third party production).
“We responded rapidly throughout 2023 and are working hard to reposition the business to address both the global and local challenges that currently face the PGM industry,” said Craig Miller, CEO of Amplats. “It is clear to us, however, that the extensive range of actions we have already taken do not go far enough.”
The potential restructuring is in addition to those cost-saving measures and follows similar warnings by Impala Platinum and Sibanye-Stillwater that they were looking at cost saving measures that could result in job losses.
Amplats has kept production guidance unchanged despite the planned restructuring, however. In December it guided to own production of between 2.1 and 2.3 million oz for the next three years. Refined production was forecast to be 3.3 and 3.7 million oz in 2024, decreasing to between three and 3.4 million oz in 2025 and 2026.
Miller said the majority of full time employee jobs lost in the restructuring would be at Amandelbult where production had bee in decline since 2019 (down 11% in 2023 vs 2022). “We have closed areas but we didn’t take the people out,” he said in an interview.
Job cuts were also a consequence of Amplats’ other major announcement today that it would place its Mortimer smelter on care and maintenance whilst running a study for it to be converted to a slag retreatment facility.
Shutting Mortimer would also save R3bn to R3.5bn in capital costs as it would avoid the expense of a furnace rebuild and construction of an SO² abatement facility, said Miller. These capital savings would come into affect over the next three years and were not in excess of Amplats’ R10bn saving strategy which also comprised R5bn in capital cost savings (in addition to the R5bn in operating cost savings).
Prices lower for longer?
Asked if the restructuring review indicated a more pessimistic outlook of the PGM market for this year than expressed last year, Miller said the group hadn’t changed its outlook from December. “We don’t think the palladium or rhodium outlook will change. We’d like them to but if they don’t the business needs to be sustainable.
For 2024, Amplats is not anticipating significant growth in automotive demand which could imply prices “could be stable” or even improve if battery electric vehicle absorption rates slow as indicated by China sales which fell 47% in January (61% of total BEV market).
“We are seeing some challenges of going to a BEV materialise,” said Miller. This would make the adoption of plug-in hybrid vehicles more feasible which, given some autocatalysis is required, positive for PGM demand from the automotive sector.
“It’s really uncertain,” said Miller. “What will happen from a macroeocnomic point of view, when will interest rates come down, and when will people buy a new car?” he said.
Amplats announced a final 2023 dividend of R9.30 per share or R2.5bn. This brings the total dividend declared for 2023 to R21.30/share or R5.7bn, equivalent to a 40% pay-out of headline earnings, and compares to a payout of R115bn in the 2022 financial year.
