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Amplats assures market it will maintain sales volumes despite asset sales

21st July 2014

By: Leandi Kolver

Creamer Media Deputy Editor

  

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JOHANNESBURG (miningweekly.com) – Platinum miner Anglo American Platinum (Amplats) will sell its interests in the consolidated Union-Rustenburg mine as well as Pandora joint venture (JV) operations and is assessing the possible exit of the Bokoni JV, to enable it to focus on assets that could deliver higher margins, lower costs and improved returns on capital.

The platinum producer emphasised that, while it had a number of high-quality assets, management time and capital were finite and, therefore, the decision was made to reposition the company’s portfolio.

“The intention to exit Union mine and concentrators has already been announced, and it has now been concluded that Rustenburg and our Pandora JV asset will be better placed in the hands of new owners, who would be able to provide the focus and capital for the operations to have a successful future,” Amplats said, adding that it would exit from these operations in the most appropriate manner, whether through sale or a public market exit.

The consolidated Union-Rustenburg currently had production capacities of about 200 000 oz and 400 000 oz a year respectively, making up about one-quarter of Amplats’ overall output of 2.3-million ounces a year.

During a media call on Monday, Amplats CEO Chris Griffith noted that the company would still seek to buy the concentrate from these mines, which would allow the miner to maintain its platinum sales of 2.3-million ounces.

The company would also maintain the growth plans for its remaining assets, which would enable it to, over the next ten-year period, increase its own production to 2.3-million ounces a year, once again, in effect making up for the ounces of production lost as a result of the proposed sale, Griffith explained.

He added that, along with the concentrate it would buy from the Union-Rustenburg mine’s new owners, the company could potentially grow its sales to 2.9-million ounces a year in ten years’ time.

Griffith further pointed out that Amplats would retain its base metals and precious metals refineries at the Rustenburg operation.

“We would not be interested in selling our refineries, because [that] would mean that we would need to refine our metals through someone else,” he said.

He did, however, note that there had been some discussion around possibly disposing of the smelter at the Union operation, but stated that the decision had been made that this smelter currently still fit with Amplats’ portfolio.

The Union mine employed about 7 000 workers, while Rustenburg employed about 20 000, making up just over half of Amplats’ 50 000-employee workforce.

The National Union of Mineworkers (NUM) on Monday said that it "noted with serious concern and shock"  Amplats' decision to sell its oldest South African platinum mines.

"Amplats' move would leave 20 000 mineworkers jobless. Any sale is going to result in job losses and this is punishment for poor workers. We continue to make an appeal for workers to reject divisions and stay united to defend jobs," NUM general-secretary Frans Baleni said.

Griffith, however, assured that a substantial reduction in staff was not expected.

He added that, as the asset sales process was still at an early stage, no specific timeline for completion could be given yet; however, he highlighted that a number of suitors have shown an interest in acquiring these assets.

“Now that we have finally announced the process officially, we will be able to enter into a more formal process of opening up to suitors. Now we will be able to start the conversation,” he said.

Meanwhile, he noted that, to date, government seemed supportive of the proposed transactions.

“This is not a question of Amplats leaving the country or downscaling its operations. We maintain a growth agenda and investment agenda in South Africa. Our investment could be anywhere between R70-billion to R100-billion over the next ten years,” he said. 

Further, Amplats was looking to streamline its JV portfolio, stating that the Bokoni JV was another asset the company believed would likely not “fit the envisaged future portfolio and would provide attractive opportunities for other players within the platinum group metals sector”.

“There are a number of potential investors seeking access to the platinum industry and these are good long-life assets with potential that will provide them with that access,” it said.

The company stated that, in future, its capital spend and focus would be prioritised on its Mogalakwena, Unki, Twickenham and Amandelbult mines, as well as its Mototolo, Modikwa, Kroondal and the Bafokeng-Rasimone JV operations.

“The delivery of our strategy will allow us to focus capital efficiently on the repositioned portfolio, achieving a more profitable, sustainable company for the future. We will continue to work closely with all key stakeholders to ensure optimal outcomes for the assets, [our] employees and the South African platinum industry as a whole,” Griffith commented.

FINANCIAL RESULTS
Amplats on Monday reported a decline in headline earnings to R157-million for the six months ended June 30, compared with R1.3-billion during the prior corresponding period.

Profit attributable to shareholders amounted to R429-million, or R1.64 a share, while headline earnings a share were 60c.

Net sales revenue of R27.8-billion for the period was 15% higher than the R24.1-billion earned in the first half of the previous financial year, owing primarily to the impact of the weakening of the rand/dollar exchange rate and a marginal improvement in the US dollar basket price.

Refined platinum sales for the period marginally declined to 1.04-million ounces.

“This was achieved despite 440 000 oz of equivalent refined production lost during the industrial action and subsequent ramp-up, as sales were supplemented with a drawdown in stock of approximately 300 000 oz,” Amplats noted.

Equivalent refined platinum production from the mines managed by Amplats and its JV partners for the first half of this year, at 715 000 oz, was 39% lower year-on-year, mainly as a result of the industrial action but also the consolidation of certain mines.

“In spite of the challenges of such a prolonged strike, [the] Mogalakwena, Unki and Twickenham [mines] continued to operate throughout the period,” the company noted. 

Mogalakwena achieved a record performance, increasing production by 20 400 oz to 184 800 oz, a 12% increase, as a result of higher achieved 4E built-up head grade and increased concentrator throughput, supported by improved mining performance.

Amplats said equivalent refined production in the second half of the year would be impacted by the post-strike ramp-up process, which was estimated to return to steady-state by the fourth quarter.

The company had working inventory levels that were currently lower than normal operating levels that would necessitate a restocking as production resumed and returned to normal.

As a result, Amplats had revised its refined production and sales guidance for the year to between 2-million and 2.1-million platinum ounces, compared with the previously expected 2.1-million ounces.

“The dominant feature of the first half was the strike, during which 40% of our production was not in operation. However, we were able to ensure security of supply to our customers throughout the period, and those operations unaffected by the strike showed stable and improved performances.

“Since the end of the strike, we have been working to ensure a safe return to work and rebuilding relationships with our employees and the ramp-up process is proceeding well,” Griffith said.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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