JOHANNESBURG (miningweekly.com) – A weaker rand and increased sales volumes helped Anglo American Platinum (Amplats) to cushion the blows of labour unrest, higher costs and lower prices as it reported 88% higher earnings a share in the six months to June 30.

Although illegal industrial action impacted production, unit costs and labour productivity, Amplats managed to deliver a solid operational performance during the period.

The JSE-listed platinum leader reported headline earnings a share of R5.14 in the first half (H1) of 2013, on a weaker rand and upped platinum sales volumes, partially offset by the impact of higher costs and lower realised dollar metal prices.

Headline earnings for the first half of 2012 excluded an after-tax loss of R1.2 billion or R4.55 a share, resulting from the revaluation of the company’s investment in the JSE-listed Chinese-controlled Wesizwe Platinum and the write-down of assets, which were considered uneconomical in the current environment, compared to an after-tax loss of R142-million or 54c a share in H1 2013.

Net sales revenue increased by 24% or R4.7-billion to R24.1-billion. R1.8-billion of the increase in net sales revenue was owing to higher sales volumes and R2.9-billion was owing to higher average realised rand prices.

Refined platinum sales for the period increased by 11% to 1 074 155 oz.

While the company delivered a strong growth in earnings, the need to restore profitability and align production with market demand had not diminished, said Amplats CEO Chris Griffith.

“We have continued with the process of reducing overhead costs and improving efficiencies so as to align our cost base with the proposed footprint. We will right-size and simplify the overhead structure to support the revised portfolio review proposals,” he added.

He said that the company was revising its refined platinum production target for 2013 to 2.3-million ounces, up from the previously announced target of between 2.2-million and 2.3-million ounces of platinum as a result of the delay in the implementation of the restructuring proposals.

The realised average dollar basket price declined by 5% from $2 532/oz in H1 2012 to $2 416/oz.

However, the average exchange rate achieved on sales during H1 2013 was R9.31, 17% weaker compared to R7.94 in the first half of the previous year.

As a result, the average realised rand basket price in the first half of 2013 was R22 473 a platinum ounce, 12% higher than the basket price of R20 086 achieved in H1 2012.

Equivalent refined platinum production was 1.2-million ounces, in line with H1 2012, and labour productivity declined marginally by 1% to 6.5 m² in the first half of 2013.

The global platinum market continues to suffer supply disruptions, production curtailment and capital rationing in the current economic environment, while net platinum demand is expected to remain relatively flat in 2013.

This is despite higher than expected demand in the first half of 2013.

Vehicles sales in Europe remain depressed with price sensitive jewellery and investment demand vulnerable to any platinum price improvement from the current depressed levels.

Primary supply challenges are expected to continue during 2013 with higher mining inflation putting pressure on margins and increased risk of supply disruptions from industrial action in South Africa.

The current depressed price has reduced operating margins and, consequently, capital investment in sustaining current and increasing future production has reduced significantly.

“Although we believe that the longer term supply/demand outlook for the platinum business remains attractive, the operating environment remains difficult. The dollar basket price is under pressure due to the weaker global economic environment, mining inflation has remained well above the South African consumer price index and labour unrest linked to union rivalry continues to present challenges,” Griffith said.

There was an improvement in safety and production performance in spite of the challenging industrial relations environment.

“We are also encouraged by the operational performance of our underground mines, particularly against the backdrop of illegal industrial actions, a national bus driver strike which impacted employees’ ability to commute to work and labour shortages as a result of lack of flexibility in deploying staff to areas where they are needed,” he added.

One employee lost his life in H1 2013: “We are continuing to work with government and our workforce to implement more effective means of addressing major risks and noncompliance to standards. The journey to zero harm remains our key strategic objective,” Griffith said.

Amplats, a member of Anglo American plc, has its mining, smelting and refining operations based in South Africa. Elsewhere in the world, the Anglo American group owns Unki platinum mine in Zimbabwe and is actively exploring in Brazil.