JOHANNESBURG (miningweekly.com) – Platinum group metals (PGMs) mining and marketing company Anglo American Platinum (Amplats) on Monday reported a robust set of financial results and a strong safety performance, illustrating the resilience of the business despite significant headwinds.

The JSE-listed company delivered 6%-higher R13.1-billion of earnings before interest, taxation depreciation and amortisation (Ebitda) and declared an interim gross cash dividend of R10.23 per share on the ordinary shares from profits accrued during the six-month period ended June 30, in line with the adopted 40% pay-out ratio driven dividend policy.

Highlights included:

• zero fatalities at managed operations, marking 620 consecutive fatality-free days to June 30;
• dedication to the health and wellbeing of employees and communities during the Covid-19 pandemic;
• R1.2-billion paid to employees not working during lockdown to ensure all employees received their full salaries and benefits;
• R250-million invested in Covid-19 measures, including R55-million on community initiatives with various programmes benefiting over one-million people;
• PGMs production impacted by national lockdowns in South Africa and Zimbabwe, with 585 000 oz lost in the first half (H1);
• refined PGMs production affected by the temporary shutdowns of the Anglo Converter Plant (ACP) for repairs and Eskom power outages that occurred in the first quarter;
• robust prices supporting a solid financial performance;
• Ebitda well above last year’s R12.4-billion;
• a healthy balance sheet, with net cash of R11.3-billion;
• liquidity headroom of R16.6-billion, excluding customer prepayment; and 
• the H1 dividend totalling R2.8-billion.

Amplats said in a release to Mining Weekly that a stronger performance was expected in H2, although significant headwinds and risks still existed, including the Covid-19 pandemic impacts, the repair of ACP Phase A, and potential for Eskom power outages.

Amplats CEO Natascha Viljoen commented that the results demonstrated commitment to safe, responsible and profitable production, and reflected the "incredible work done by our entire team during this challenging time”.

Viljoen said that she was particularly proud of the important work done to support Amplats employees and host communities during the Covid-19 pandemic.

“The strength of our business has supported our ability to continue paying employees throughout the lockdown, with R1.2-billion paid on salaries and benefits to employees not working during lockdown and those not able to return to work. In addition, we have invested R250-million until the end of June in Covid-19 measures in the workplace and our host communities.

Despite the challenges and safety risks brought about by shutting down and restarting operations, Amplats, she said, had reported its best-ever safety performance in the past six months, with own-managed operations running without a fatal incident for an unprecedented consecutive 620 days until the end of June.

“However, we are deeply saddened to have lost one of our colleagues, Mr Joao Silindane, in a fall-of-ground incident at Kroondal, a non-managed joint venture operation. Our sincere condolences go out to his family, friends and colleagues,” Viljoen said.

Operationally, total PGMs production, expressed as platinum, palladium, rhodium, gold, iridium and ruthenium metal in concentrate, including joint ventures and third-party purchases, declined by 25% year-on-year in the first half to 1 619 900 oz, mainly owing to the impact of Covid-19 lockdowns in South Africa and Zimbabwe. At the end of June, production levels at managed operations were at around 80% of normal capacity in aggregate, and we expect this to increase to over 95% by the end of the year as we benefit from a high proportion of openpit and mechanised production.

Total refined production, including tolling, declined by 46% to 1 246 900 oz, as the temporary closure of the ACP and load-shedding in the first quarter impacted production.

Viljoen said that work is well under way to repair Phase A of the ACP, which was expected to be completed by year-end. A cautious approach had been taken with the ongoing operation of the Phase B unit during this period, with increased monitoring likely to result in intermittent stoppages to inspect the plant until the repairs to Phase A were completed.

As a result of the ACP process interruptions, there was a build-up of work-in-progress inventory of around 500 000 PGM ounces. It is expected that 45% of this build-up in inventory would be released in the second half of 2020.

In line with the 25% decrease in mining production, the unit cost of production per PGM ounce increased by 26% to R12 555 (H1 2019: R9 951). Excluding the costs associated with unproductive labour amounting to R1.2-billion, or R1 057 per ounce, unit costs would have been R11 498, or 16% higher than H1 2019.

PGM prices were volatile as the Covid-19 pandemic hit both the demand and supply sides of the PGM markets. In dollar terms, the average realised basket price was 56% higher year-on-year at $1 956 a PGM ounce (H1 2019: $1 255 per ounce). The rand weakened 15% against the US dollar, leading to an 80% increase in the rand basket price to R32 166 per PGM ounce (H1 2019: R17 901 per ounce). As a result of higher prices, net sales revenue increased by 28% to R54.8-billion.

On recommendation from the nominations committee, the board approved the appointment of Thabi Leoka and Roger Dixon as independent nonexecutive directors with effect from July 27.

OUTLOOK

PGMs production guidance (metal-in-concentrate) is between 3.1-million and 3.6-million PGM ounces for 2020, with refined production and sales volumes expected to be in the same range.

"While the early stages of recovery are under way in many geographic regions, there remains a great deal of uncertainty, with limited visibility beyond a few months. Mine supply is expected to be sharply lower this year owing to the impact of Covid-19, while global recycling volumes are expected to be less affected.

"PGMs demand will be impacted by the decline in global car and commercial vehicle sales and production, weaker sales of platinum jewellery, and softer industrial demand. Despite the impact on demand, we expect platinum, palladium and rhodium to remain in deficit this year. Longer-term, the company remains committed to expanding the role PGMs can play in enabling a lower carbon economy and Amplats continues to lead the industry’s demand creation efforts across the industrial, investment and jewellery demand segments.

“The long-term fundamentals for our suite of precious metals are strong, and we will continue investing to deliver value for all our stakeholders through the cycle. While the Covid-19 pandemic has required significant effort to keep our employees safe, as well as ensure that operations continue, we are focused on progressing the next stage of value delivery.

“Our focus is on implementing technological improvements and innovation across our operations to meet and exceed the world benchmarks for operational excellence and investing in high-returning projects while studying potential growth and replacement options at Mogalakwena and Mototolo/Der Brochen. We also continue to leverage our market development efforts,” concluded Viljoen.