ANGLO American Platinum (Amplats) said on Monday it had cut R4.9bn in costs for the six months ended June affecting 3,700 jobs and shut its Mortimer smelter.
This is in terms of a plan unveiled last year to slash R10bn from annual operating and capital costs. The group said about 75% of affected employees had left the company. About 60% of the review had been completed.
However, Mortimer may be re-engineered at a capital cost of about R1bn so it can treat stockpiles of slag at Waterval.
Amplats CEO Craig Miller declined to detail the potential production benefit, but said: “There are significant volumes in PGMs but also the tailings are quite high in base metals content. You will start to see refined ounces coming out in 2026 and 2027.”
Amplats has targeted cash operating unit costs of R16,500 to R17,500 per PGM ounce as a result of the restructuring but a year-on-year decline in second quarter production resulted in R18,280 per PGM oz in unit costs for the six months.
Despite this Miller said his company “remained on track” to hit its production and cost targets as he expected an improvement in the second half. The benefits of the restructuring would also start to kick in, he added.
Guidance for its 2023 financial year was unchanged at between 3.3 and 3.7 million oz in refined ounces despite a potential 5% to matte and concentrate production at both Mogalakwena (North concentrator technical problems) and Amandelbult (stoppages relating to two fatalities).
All in sustaining costs (AISC) totalled $957/oz in the first half – below the $1,050/oz AISC target in terms of the restructuring.
Amplats declared an interim dividend of R2.6bn equal to R9.75 per share in line with its payout policy of distributing 40% of headline earnings which totalled R6.5bn – 17.7% lower year-on-year. The decline in earnings was owing to weaker average platinum group metal (PGM) prices, down 24% in dollar terms.
Interim Ebitda came in only 8% down at R12.3bn on the back of improved sales year-on-year (as per last week’s second quarter production update) and as Amplats made up for lower mined production with a release of from metal inventories.
The group ended with cash of R14.5bn as of end-June.
Metals market tightening?
As detailed in its production update last week, Amplats boosted lower production with a draw down from inventories such that sales increased 14% to 1.27 million oz. But the impact of a 24% decline in rand-denominated prices was the greater on group earnings.
Prices have been under pressure partly because automakers, who comprise two-thirds of metal demand, had significant stocks following the Ukraine invasion in 2022. There was evidence the destocking cycle is drawing to an end.
“We are seeing more frequent spot purchases from our automaking colleagues as production surprised on the upside which is comforting,” said Hilton Ingram, executive head of PGMs marketing.
He also reference sanctions on a Hong Kong based trader recently for dealing in gold which resulted in a 15% increase in palladium and lease rate for the metal “shooting out to greater than 10%. I take both of those as evidence that inventories in the West aren’t as high as people anticpated,” said Ingram.
“You’re expecting prices to trade more in line with physical supply and demand but the challenge continues to be a large short position in palladium,” he added.
Another factor influencing the direction of PGM prices is the re-direction of Russian production, especially palladium into the Hong Kong/China market. Miller said a significant change of flows in metal had occurred in the last two years. “Do I think that market is being sold at a discount? I think it’s marginal, that discount,” he said.
