[miningmx.com] — SUPPLY reductions in platinum group metal output
have almost entirely been from among the ranks of the mid-cap and junior miners:
Royal Bafokeng Platinum, Aquarius Platinum, Eastern Platinum and, the latest,
Platinum Australia.
But that could change. Impala Platinum’s (Implats’) incoming CEO, Terence
Goodlace, is expected to embrace the fact the group’s Lease Area mine in
Rustenburg – sometimes a 1m ounce per year producer – is best operating at
920,000 oz/year.
Then there’s Anglo American Platinum (Amplats), which is conducting its own
internal review to decide how best to optimise its portfolio of mines. So far, it has
had influence on the closure of its Marikana mine, which it holds in joint venture
with Aquarius Platinum.
Yet, it hasn’t turned its attention to bigger fish in the portfolio: its Rustenburg mine,
for instance, which provides employment to some 20,000. The staff complement is
an important point to mention because, industry speculation posits, Amplats CEO
Neville Nicolau is reluctant to make the cuts; in fact, he’s calling for more
investment in the mine.
Controlling shareholder, Anglo American, led by Cynthia Carroll, has a different
opinion. In fact, the tittle-tattle goes, the two are at loggerheads as to whether
Rustenburg ought to be restructured at all. Unsurprisingly, Carroll is likely to win
the day, which is why the markets wags are saying Nicolau will be the latest Anglo
executive to come a cropper.
“I’ve heard it said that Nicolau isn’t being consulted regarding the restructuring
process. If he’s been pushed to one side, then it’s only a matter of time before he
collects his severance package,’ an analyst says.
Asked whether there was any grounds to the speculation, Anglo American
spokesperson Pranill Ramchander said he wouldn’t comment on market speculation.
Amplats didn’t respond to several text and telephonic messages requesting further
clarity.
Lower production is what the platinum sector needs, but it’s distressing to the SA
Government remembering that in terms of the National Growth Plan, the mining
sector is expected to create 200,000 jobs by 2019 – not lose them.
Minority shareholders in Amplats are also likely to be grinding their teeth if, as SBG
Securities platinum analyst Justin Froneman contends, Amplats’ interim dividend is
vulnerable. In a report earlier this month, Froneman said a production lock-up –
refined platinum that has been trapped in the system owing to plant maintenance –
of some 130,000 oz was unlikely to be sold as expected because Amplats was
waiting for better selling prices.
The effect is that while Amplats may fetch a better price for this platinum at a later
stage, its lower production will mean a R3.4bn reduction in net revenue for the six
months to June 2012, and a negative R400m adjustment to the company’s cost of
sales. The first-half gross profit margin has, therefore, been downgraded by
Froneman to 3% from 8% as previously forecast.
Share earnings are expected to come in at R1.16 for the first half which compares to
a Bloomberg consensus of R5.14/share.
“Furthermore, given the thin operating margins to be on offer and anticipated
negative free cash flow of R3bn for the period, we consider it likely that Amplats will
pass on the [first half] dividend declaration,’ said Froneman in his report.
These are dark days for the platinum sector but for the bold among us, they must
surely present a buying opportunity. One broker believes that on a 12-month view,
the platinum sector offers 25% in upside and recommends both Implats and
Northam Platinum as good picks. Having lost 60% since the beginning of the year,
one wonder if Aquarius Platinum is correctly priced, especially as supply discipline is
creeping back.
– Finweek
