JOHANNESBURG (miningweekly.com) – Anglo American Platinum (Amplats) on Monday reported generating R3.2-billion free cash flow in the six months ended June 30, and cutting debt by R2.9-billion, despite the lower price environment.

The leading platinum producer’s sales revenue increased by 3% to R30.7-billion, its earnings before interest and tax increased by 12% to R1.5-billion, headline earnings totalled R1-billion and headline earnings were R3.99 a share.

Platinum group metal pricing during the period remained weak, with the average US dollar basket price a platinum ounce sold decreasing by 24% in H1 2016 to $1 632, versus the $2 157 achieved in 2015.

The decline in dollar metal prices was partly offset by a weaker rand resulting in the rand basket price a platinum ounce ending 3% weaker at R25 100, compared to R25 748 in the first half of last year.

“We remain focused on cash conservation and disciplined capital allocation,” Amplats CEO Chris Griffith said.

The company is continuing to prepare for the future through market development and modernising through innovation in mining and processing technology.

CUTTING UNPROFITABLE OUNCES

Since 2013, Amplats has reduced unprofitable platinum production by 350 000 oz.

A billion rands worth of overhead cost savings have been identified through the reduction of 400 managerial roles and non-labour overhead savings, with R400-million of that achieved in the period.

The company’s cash operating costs of R17.8-billion increased by a below-inflation 5% and unit costs of R19 436/oz increased by 1.8% over the R19 095/oz achieved in the first half of last year.

Platinum production, on a metal-in-concentrate basis, lifted 2% to 1 153 000 oz, with 2%-higher output at the flagship Mogalakwena to 208 000 oz.

Amandelbult was 15% up at 217 000 oz and Unki in Zimbabwe 13% up 36 000 oz. Platinum production from joint ventures, inclusive of both mined and purchased production, rose 8% to 388 000 oz.

Production at Union, which is up for sale, rose 15% to 75 000 oz while production from Rustenburg, which is being sold to Sibanye Gold, fell 10% to 219 000 oz.

Refined platinum production fell 9% to one-million ounces, owing to a Section 54 safety stoppage at the Precious Metal Refinery in the first quarter, which halted production for 12 days and impacted production for a further 37 days during build-up.

However, the refinery had a stellar second-quarter refining performance to make up most of the shortfall.

Refined platinum sales volumes increased by 5% to 1.2-million ounces, supplemented by a drawdown in refined inventory and some market activities.

FOUR FATALITIES

Four workers died in the six months to June 30.

“Tragically, we had four losses of life due to work related incidents. Our deepest condolences go to the families, friends and colleagues of Mr Kubheka, Mr Ntamehlo, Mr Henrico and Mr Ngqambiya,” said Griffith in a media release to Creamer Media's Mining Weekly Online.

Previous guidance on production remains in place, with platinum production expected to be towards the upper end of 2.4-million ounces.

Unit cash cost guidance is unchanged at between R19 250/oz and R19 750/oz.

The target is to achieve direct overhead savings and indirect savings of R1-billion in the fourth quarter.

Capital investment decisions on all major projects have been delayed until after 2017, and then only if the market demands more metal.

Capital expenditure guidance for the year has been cut to no higher than R4-billion for 2016 from up to R4.2-billion previously.

Amplats is forecasting further reduction in net debt at current spot and foreign exchange prices, with earnings remaining highly geared to the rand/dollar exchange rate.