Amplats reported a strong set of financial results, accompanied by an improvement in the overall safety performance of the business.
This reflects management’s commitment to ensuring safe production while delivering value.
Anglo American Platinum (Amplats) benefited from much stronger global prices for the basket of platinum group metals (PGMs), particularly palladium and rhodium, and from a weaker rand against the US dollar.
Operational performance was steady despite Eskom power outages and an unprotected strike at Mototolo Mine, and a stronger operational performance is expected in H2 2019.
Commenting on the results, Amplats CEO Chris Griffith says: “We are pleased to report that Amplats has delivered safe, responsible and profitable production in H1 2019.
"We are committed to eliminating fatal incidents on a permanent basis and ensuring safe operations, while delivering leading returns in the PGM industry.
"Thanks in part to strong fundamentals for the PGM basket price, we have increased EBITDA by 82% to R12.4 billion, resulting in an increase in the EBITDA margin to 32% and doubling our return on capital employed (ROCE) to 45%.”
A temporary increase in work in progress (WIP) inventory should be largely refined in H2 2019. Despite this temporary increase in inventory, Amplats generated operating free cash flow of R4.3 billion, further strengthening the balance sheet to a net cash position of R6.0 billion.
This compares to the R2.9 billion net cash position at 31 December 2018.
A cash dividend of R3 billion or R11/share was declared for the first half of 2019, based on the company’s dividend policy of 40% of headline earnings.
“This is very much a stronger business today because of the actions we have taken in recent years and I’m pleased to say that there are further opportunities to unlock the full potential from our operations,” says Griffith.
Amplats maintained stable PGM production (expressed as platinum, palladium, rhodium, gold, iridium and ruthenium metal in concentrate) in the period, with output decreasing marginally by 2% year-on-year to 2,146,900 ounces due to Eskom power disruptions in Q1, the unprotected strike at Mototolo in Q2, as well as once-off production benefits at Mototolo, Modikwa and Unki in the prior period.
Platinum production decreased 3% to 515,800 ounces and palladium declined 4% to 417,500 ounces.
At Mogalakwena, PGM production decreased by 5% to 610,000 ounces, from the prior period’s record performance, mainly impacted by Eskom power outages as well as maintenance at the North concentrator.
In addition, a strategic decision to start a new mining cut in the first half of the year led to a decrease in ore tonnes mined over the period and an increase in waste tonnes mined, and production was partially supplemented by a draw-down in ore stockpiles.
This will be reversed in H2 2019. Amandelbult also saw lower production; however, the turnaround plan is gaining momentum, with an expected ramp-up now that infrastructure upgrades at Dishaba, including winder and hoisting capacity upgrades, have been completed.
The second quarter of 2019 showed a 19% improvement over the first quarter. These production declines were somewhat offset by a record performance from Unki and overall, an improved H2 production performance is expected.
Amplats has maintained its production outlook for the full year of 4.2 – 4.5 million PGM ounces (excluding toll material), with PGM sales volumes expected to be in line with refined production of 4.6 – 4.9 million PGM ounces.
The medium-term outlook for PGMs remains positive thanks to robust demand fundamentals for the group of metals, with sharply higher dollar metal prices for palladium and rhodium offsetting lower platinum prices.
This will continue to drive strong earnings.
“We are committed to the next phase of value delivery and work is underway to realise value at existing operations. Our aim is to achieve, and beat, world best operating practices and implementing FutureSmart technology and innovation to enable material efficiency improvements.
Market development continues to progress, with a number of achievements made in H1 2019, including investments into the green economy and new product launches to promote platinum demand.
Finally, project studies continue to assess how to unlock optimal value from Mogalakwena and the Mototolo/Der Brochen ground,” concludes Griffith.