Amplats interim earnings soar despite power cuts, strikes

Anglo American Platinum [JSE:AMS] said on Monday Eskom power outages put a damper on production in the first quarter, with output of platinum group metals declining 2% year-on-year to 2 146 900 ounces.

According to interim financial results for the period to June 30, platinum production decreased 3% to 515 800 ounces and palladium declined 4% to 417 500 ounces.

Despite the reported operational challenges, the miner reported an increase in headline earnings per share, up 120% to R28.15.

At 12:37 on Monday, shares were changing hands at R837.39, down 0.40%.

Amplats CEO Chris Griffith said although the company had seen steady production from its operations, "certain headwinds, including Eskom power shortages and strike action at Mototolo, have impacted our first half performance".

The mines affected by power cuts included Mogalakwena and Amandelbult.

At Magalakwena Mine in the Limpopo province, power cuts impacted production by 12 000 PGM ounces, Amplats said, while a "minor shutdown for maintenance" on the secondary mill at North concentrator also affected operations.

In July 2018, Anglo American Platinum's subsidiary, Rustenburg Platinum Mines, announced the purchase of Glencore's 39% interest in the Mototolo joint venture.

A three week-long unprotected strike at Mototolo Mine also saw production of platinum group metals decrease 32% to 107 300 PGM ounces.

The company dismissed 643 members of its underground workforce as a result of the illegal strike at the mine near Burgersfort in Limpopo.

Amplats said it expects production at Mototolo to normalise in the second half "as a result of the acquisition of the mine into the Anglo Platinum mining portfolio".

Dividend payment

The board has declared an interim dividend based on a payout ratio of 40% of headline earnings of R3.0bn, or R11.00 per share.

The company said platinum underperformed in the first half, compared to the other platinum group metals due to weak sentiment and a challenging macroeconomic environment.

"Global platinum supplies are forecast to rise modestly in 2019. In South Africa, pipeline releases should push supply slightly higher than in 2018, although underlying supply is stable."

Demand from the automotive sector expected to "increase modestly" in what which should be balanced by a slight decline in gross jewellery demand, according to the company.

It further stated that industrial demand remains firm, with strong buying from the Chinese chemicals sector in particular.

"This should push the supply and demand balance into a small deficit for 2019."