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Mining Giant Amplats Expects Full-Year Loss to Hit $853 Million

  • No. 1 platinum producer to post bigger than expected 2015 loss
  • Producers unable to cut much supply, aiding price plunge

Anglo American Platinum Ltd. said it’s writing off about 30 percent of its book value, a sign that other producers of the precious metal may follow, analysts said.

QuickTake The Politics of Platinum

The world’s biggest platinum miner will impair its assets by about 14 billion rand ($851 million), giving a 2015 basic loss of as much as 12.2 billion rand, the Johannesburg-based company said in a statement Monday. Impala Platinum Holdings Ltd. and Lonmin Plc, the second- and third-largest producers, may follow suit, according to Richard Hart, an analyst at Arqaam Capital Ltd. in Johannesburg.

“We’re going to see writedowns across the board,” Hart said by phone. “If you look at the pricing assumptions the producers use for their reserve calculations, they are way out of sync with where the market is.”

Platinum, used in automobiles’ catalytic converters to reduce emissions, has plunged 30 percent since the beginning of 2015 as part of the global rout in commodities, while palladium and rhodium, which are mined with the metal, have tumbled 38 percent and 48 percent respectively.

Cut Supply

With about 70 percent of the world’s mined platinum output coming from South Africa, one answer would be to cut supply.

“It’s very challenging to do that,” Richard Hatch, a mining analyst at RBC Capital Markets in London, said by phone. “They are doing what they can but the headcount is so significant.”

Workers went on a record five-month strike over wages in 2014 and are due to renegotiate pay again later this year. “It’s a volatile time to be cutting headcount or closing shafts,” Hatch said.

Shareholders’ Funds

To cope with the downturn, investors have pumped 4 billion rand into Impala Platinum and about $400 million into Lonmin. Amplats, 77 percent owned by Anglo American Plc, is instead selling assets such as three mines in Rustenburg.

That has meant supply of the metal has been relatively stable, according to Hart. The industry needs to cut about 10 percent of production to lift prices, he said.

“Everybody’s waiting for someone else to fall over,” Hart said. “The problem with that is if nobody falls over, eventually everybody falls over.”

About 23 percent of South Africa’s production is losing money at current prices, according to Rene Hochreiter, an analyst at Noah Capital Markets Pty Ltd. in Johannesburg. Including metals mined with platinum, producers are receiving about 404,000 rand a kilogram, compared with 527,000 rand when prices peaked in 2008, he said.

That has almost negated the benefit of the weak rand, which normally helps producers of dollar-denominated commodities. The South African currency has lost 31 percent against the greenback since the start of 2015.

Lonmin spokeswoman Sue Vey declined to comment before the company’s first-quarter results on Jan. 28.

Impala has “been at the front of the queue” on asset writedowns said Johan Theron, a spokesman for thee producer. The company wrote down its assets by 5.8 billion rand in September.

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