Finweek_English_Edition_-_March_19,_2020__

By David McKay

in brief in the news

12 finweek 19 March 2020 http://www.fin24.com/finweek

MINING

How Amplats explosion impacts

platinum miners

t

he suspension of refining of platinum group

metals (PGMs) at Anglo American Platinum’s

(Amplats’) Waterval facilities in Rustenburg

following an explosion of the plant – and the

subsequent technical problems with its backup unit

• means different things to different companies.
  For Amplats, the disruption means it will
  produce 900 000 ounces less PGMs in 2020 –
  roughly comprising of about 600 000 ounces in
  platinum and 300 000 ounces less palladium.
  That will result in a hit to pre-tax earnings of
  $1.1bn, according to a report by RMB Morgan
  Stanley in the wake of Amplats’ announcement in
  early March.
  The group, controlled by Anglo American, is
  adequately financed to cope with the working
  capital build-up brought about by not being able
  to sell refined platinum, which will be most severe
  over the first 80 days. That’s the estimated time to
  fix the backup units. (It will take 12 to 15 months to
  repair the facilities affected by the explosion).
  As of 31 December, Amplats had R17.3bn in
  net cash on its balance sheet (prior to R10.9bn
  in dividend payments), and R26bn in available
  facilities. Amplats is also working with its insurers
  in order to identify a potential claim.
  For Impala Platinum (Implats) and Northam
  Platinum: happy days! Apart from adding further
  upward pressure on the palladium market – which
  is already in backwardation – it will almost certainly
  push the platinum market into a supply deficit.
  In March, the World Platinum Investment
  Council forecast a narrow 110 000 ounces deficit
  for platinum, down from more than 800 000
  ounces in 2018, indicating that the platinum
  market was already tightening. Sibanye-Stillwater
  will also benefit from higher prices.
  The immediate future is less certain for
  the PGM companies that supply concentrate
  to Amplats for smelting. Smelter facilities are
  expensive and specialised; in fact, only Amplats,
  Implats, and Sibanye-Stillwater are fully integrated
  from ‘mine to metal’.
  Therefore, a group of companies rely on Amplats
  to buy their concentrate, which is then smelted.
  These are so-called purchase of concentrate
  (PoC) agreements which Amplats CEO, Chris
  Griffith, confirmed would be just as affected by
  the shutdown as its own mine and concentrate
  production.

Jana Marais

Spokesperson

for Amplats

The closure of a critical concentrator in Rustenburg may increase the global deficit of platinum group metals.

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For Amplats, the

disruption means

it will produce

900 000 ounces

less PGMs in 2020.

Of these companies, the one likely to be least

affected is African Rainbow Minerals (ARM), a

diversified group with a strong balance sheet. For

the record, Amplats processes concentrate from

ARM’s Modikwa mine, which contributes about

47% of ARM’s total annual production of platinum,

palladium and rhodium.

Next is Royal Bafokeng Platinum (RBPlat),

which sends concentrate from its Bafokeng

Rasimone platinum mine and Styldrift mines to

Amplats for refining. In a worst-case scenario, and

assuming no mitigation actions, there is potential

for a R1.4bn working capital build over 80 days,

which excludes expansion capital RBPlat is

currently engaged on for Styldrift.

RBPlat halved its debt to R491m during the

six months ended 31 December from R832m a

year earlier and has cash of R883m on hand. It

also has some R1.45bn in facilities available to it.

Hanré Rossouw, RBPlat’s chief financial officer, told

finweek it was too early to comment on the strain

placed on the company’s finances by the Amplats

announcement as the company was in talks with

Amplats about potential mitigation.

Additional strain on the balance sheet, however,

would not be welcome. RBPlat recently announced

a modest dividend resumption of 10% of cash

flow before expansion, reflecting its caution; the

buoyant PGM market notwithstanding.

Finally, there is Siyanda Resources, a black-

owned company that bought the Union and

MASA facilities from Amplats for R400m in 2017.

It supplies base metals concentrate to Amplats.

Again, there is potential for mitigation while

Siyanda Resources also derives income from coal

and manganese mining so it’s not wholly reliant on

the Amplats PoC agreement. But of the various

companies affected, it looks the most vulnerable.

Amplats is playing a straight bat to the talks it’s

having with suppliers.

“We have issued force majeure notices to

all PoC suppliers, including Siyanda,” said Jana

Marais, spokesperson for Amplats.

“We are now in a period of discussion with all

PoC customers on mitigation measures.

“It is premature to comment at this stage on

what those mitigation measures may look like as

we have not yet had an opportunity to meet with

all PoC suppliers,” she said. ■

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