JOHANNESBURG (miningweekly.com) – The world’s largest platinum company Anglo American Platinum (Amplats) has posted headline earnings of R3.2-billion for the six months to June 30, 26% higher that for the corresponding period last year.

Operating free cash flow increased 159% to R4.7-billion and R2.9-billion more free cash flow was generated than in the first half of 2010. Headline earnings a share increased 20% to R12.36 a share.

Factors contributing to the higher earnings were a 15% increase in the dollar realised price on the basket of metals sold and a 13% increase in platinum sales volumes, partly offset by a 9% strengthening in the average rand/dollar exchange rate.

Amplats CEO Neville Nicolau attributes the strong financial performance to a robust recovery in the basket price of the platinum-group metals since the first half of last year plus an increase in platinum sales volumes, “amid operational challenges”.

“It reflects positively on our operational flexibility,” says Nicolau.

The positive market outlook has persuaded the board to declare an interim dividend of R1.3 billion or R5 a share.

Tragically, however, eight employees lost their lives in the period, with 33 safety stoppages in the first half of 2011, nearly double the 17 in the first half of 2010.

“The company is continuing to work with government and labour towards zero harm,” Nicolau says.

Refined platinum production increased by 17% to 1.17-million ounces in the first half of 2011 compared to the same period in 2010.

The company believes that the platinum market will remain in balance in 2011, with the continued recovery in the autocatalyst and industrial segments and the sustained strength of the jewellery segment, particularly in China, expected to be met by increases in production.

“We continue to believe that there is strong demand and investor interest to support the market,” Nicolau adds.

REPOSITIONING JOURNEY

Three years ago, the company embarked on a journey to reposition itself, with plans to improve safety, reliability and production predictability, as well as reduce costs.

Amplat’s lost time injury frequency rate declined by 32% to 1.33 in the first half of 2011 compared to 1.96 in the first half of 2008.

The eight fatalities, Nicolau points out, represent a 68% decrease from the 25 of 2007.

The production volume target, which some regard as moderate, has been met in the last three years and despite mining significantly more upper group two reef, the smelter accidents of the past have been avoided, allowing the company to tick its predictability and reliability boxes.

Its cost management strategy centres on improving productivity, increasing efficiency and managing procurement inflation.

Its restructuring plan continues with the separation of the Union mine into two separate mines to improve management and focus on costs and productivity.

Amplats has kept the refined production and sales volume target for 2011 at a moderate 2.6-million ounces and expects to deliver a strong operational performance in the second half of 2011.

Production volume increases and remedial actions to improve safety and labour productivity are expected to lower unit cost in the second half of the year to around R12 000 an equivalent refined platinum ounce.

The company has thus revised its unit cost target for 2011 to between R12 400 and R12 600 an equivalent refined platinum ounce.

The company expects labour productivity to improve from 5.9 m² achieved in the first half of 2011 to its original target of 7.3 m² during the second half of the year, bringing the average for full year 2011 to 6.6 m².

Its safety improvement plan is expected to ensure that it continues to demonstrate safety improvements.

With its mining, smelting and refining operations largely South Africa-based, Amplats is also developing Unki platinum mine in Zimbabwe and exploring in Brazil.

It has exploration partners in Canada, Russia and China and a number of joint ventures with several historically disadvantaged South African consortia as part of its commitment to the transformation of the mining industry.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.