Johannesburg, South Africa — MININGREVIEW.COM — 25 July 2011 – Anglo American Platinum Limited (Amplats) “’ source of about 40% of world output of the precious metal “’ expects costs to exceed its forecasts after energy charges rose and deaths at its mines doubled in the first half of 2011.
Costs may increase by as much as 7.4% to US$1,860 per equivalent refined platinum ounce this year Amplats said in a statement here. In February, the company said costs would be similar to 2010. Platinum has averaged US$1,785 an ounce in London this year.
CEO Neville Nicolau is completing a three-year plan to curb costs, cut fatalities and meet output targets. He began the program in 2009 to stem rising debt after platinum prices tumbled the previous year, and to improve competitiveness against rivals Impala Platinum Holdings Limited and Lonmin plc.
“Productivity improvements will be essential if cash costs are to fall back in line with financial year 2011 guidance,” Dominic O’Kane of Liberum Capital Limited in London said in a note.
Amplats said it had a very challenging start to the 2011 financial year. While the second half should be stronger, there’s still a lot of work to be done, it added.
First-half costs climbed 13 percent from a year earlier as gains in electricity, diesel, explosives, steel and wages “materially” exceeded consumer price inflation, it said. Productivity fell 18 percent per employee in the first half, partly because of public holidays, Amplats said.
The company maintained its target of refining and selling 2.6 million ounces for the year, even after eight deaths in the first half led to mine stoppages and curbed a planned surge in output.
Production in the half rose 17% to 1.17Moz at Amplats, which also mines palladium and rhodium.
First-half earnings excluding one-time items rose 20% to R12.32 a share from R10.24 as platinum prices extended their recovery by a further 12% following the 2008 slump.
Demand will grow about 4% a year and supply “slightly less than that,” Amplats added. “This will result in an increasing market deficit, particularly in palladium and platinum markets.”