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Anglo Platinum Tempers Its Production Guidance on Weaker Economic Outlook
Anglo Platinum Ltd., the largest producer of the metal, tempered its output plans for this year and said it will raise production in 2011 to meet demand.
“The market outlook is positive and we aim to respond by producing and selling more ounces,” Neville Nicolau, chief executive officer of the Johannesburg-based company, told analysts and reporters in the city today. The global platinum market is seen “erring on the deficit side,” Nicolau told reporters on a call. Anglo American Plc controls the company.
The company will raise output to about 2.6 million ounces next year after refining and selling 2.5 million ounces in 2010. In April, Nicolau said the company may refine and sell as much as 200,000 ounces more this year, depending on the economy.
Platinum, used in jewelry and anti-pollution devices for vehicles, will probably trade at an average of at least $1,500 an ounce for the rest of the year, the company estimates. That compares with an average of $1,586 so far this year. Anglo produces about 40 percent of global output, which it mines in South Africa, source of more than 90 percent of global reserves.
Automotive industry demand is “rebuilding” and jewelry industry demand remains “healthy,” Anglo Platinum Commercial Head Sandy Wood told analysts and reporters in Johannesburg.
Platinum declined along with copper, lead, zinc and other metals in the second quarter as optimism over economic recovery waned. The Reuters/Jefferies Commodity Price Index of 19 raw materials is down 9.2 percent from a high in January this year.
Greek Crisis
“The Greek crisis did happen, the world economy did take a bit of a downshift,” Nicolau said. Platinum is down 12 percent at $1,547 an ounce in London from the year’s high of $1,756.25.
Nicolau plans to lift output in the second half even after he cut 18,786 jobs and closed shafts to stem rising debt last year following the metal’s 2008 tumble from a record $2,301.50 an ounce. He wants to boost production from 1.196 million ounces of equivalent refined platinum in the first half to about 1.3 million in the second by lifting the rate at which workers mine.
Platinum’s recovery in the first half from a year earlier boosted Anglo Platinum’s profit 12 percent to 3.27 billion rand ($441 million). The company received an average $1,593 an ounce in the first half, 47 percent higher than a year earlier.
“Angloplats is still a shadow of its former self in contributions into Anglo American’s accounts,” Ambrian Capital Ltd. said in a note today. “A full recovery in Anglo Platinum’s margin potential will be very beneficial for Anglo shareholders, but requires further efficiency gains, stronger platinum group metals basket price and/or a weaker rand.”
Share Price
Anglo Platinum rose 0.4 percent to 738 rand in Johannesburg trading, for a 4.2 percent decline so far this year.
The company received a letter from the South African government on July 21 stating its mining rights are in the process of being renewed, it said today. The renewal “should eliminate a key element of ‘administrative risk’ that in our view has hung over Amplats’ shares over the last 2 years of waiting,” London-based Liberum Capital Ltd. said in a note.
The company is the third Anglo American unit to report first-half earnings. The Kumba Iron Ore Ltd. unit last week posted net income of 6.5 billion rand and 45 percent-owned De Beers will add $148 million to Anglo’s underlying earnings.
Anglo American will report underlying earnings of $1.83 a share on July 30 for the first half, according to the median estimates of five analysts surveyed by Bloomberg. Anglo’s own consensus forecast puts the figure at $1.73 a share.
To contact the reporters on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net
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