Amplats Sees Platinum at Strongest in Decade as Profit DropsAndre Janse van Vuuren
Anglo American Platinum Ltd. said a global depletion of stocks and increasing demand would aid prices as 2014 profit for the world’s largest producer of the metal declined 46 percent due to a strike.
As above-ground stocks fell 48 percent to 2.15 million ounces after three years of supply deficits, platinum “was well positioned,” Chief Executive Officer Chris Griffith told reporters on a call on Monday. Earnings excluding one-time items dropped to 786 million rand ($68 million) from 1.45 billion rand in 2013, the Anglo American Plc unit said in a statement. No dividend was declared.
“All indications suggest that platinum is in its strongest position since 2005,” said Amplats, as the Johannesburg-based company is known. “The cumulative oversupply from 2006 has been eliminated in the past three years, and signs point to demand increasing. This could also lead to an increase in the price for platinum and palladium.”
Amplats’ profit fell after a five-month strike by the largest union at its mines in South Africa, which cost the company 8.5 billion rand in lost operating profit and 424,000 ounces of equivalent refined platinum. The company is selling some of its aging, deeper-level operations as it increases production and capital spending at its mechanized Mogalakwena pit, the world’s lowest-cost platinum mine.
The company’s forecast for platinum, used in devices that cut vehicle emissions and for jewelry, comes even as prices fell to a five-year low in December. The average price of platinum in 2014 decreased 6.8 percent to $1,385.02 an ounce from the previous year. It was at $1,223.81 at 11:37 a.m. in London.
Consumption of the metal will be aided by higher vehicle sales, which rose by 3 million units in 2014, and stronger demand for jewelry, Griffith said.
“With the same fundamentals existing in palladium and rhodium, the platinum group metals market looks to be in the right place,” he said.
Amplats is busy discarding its three Rustenburg-based mines in South Africa’s North West province and its Union operations.
Bidders for the assets started due-diligence studies last month, Griffith said. Amplats may also take a decision on whether it will separately list the Rustenburg mines by the end of June, Griffith said.
“By then we’ll get a feel that we’re either fairly close and we can negotiate our way to an answer that will work for both parties or we’re so far away we’re unlikely to get closer,” Griffith said in an interview. A listing probably won’t be finalized before the end of the year, he said.
The company has received bids for its stakes in Bokoni, which is a venture with Atlatsa Resources Corp., and the Pandora venture with Lonmin Plc, Griffith said. A bid from Baroka Platinum for the Bokoni stake was “one of a number of offers” Amplats received, he said.
Capital spending for 2015 will range from 5.5 billion rand to 6.5 billion rand, about 1 billion rand of which is for “unapproved projects,” Griffith said. The rest will be allocated to existing mines and projects, he said.
Equivalent refined platinum production in 2014 declined to 1.84 million ounces from 2.32 million ounces a year earlier, Amplats said. The company forecasts sales of 2.3 million ounces to 2.4 million ounces this year.
Amplats’ cash unit costs will increase to about 19,000 rand to 19,500 rand per equivalent refined platinum ounce, it said.
Ian Botha, group financial controller at Anglo American, will take over from Bongani Nqwababa as the company’s finance director from May 1. Nqwababa is leaving Amplats at the end of February. Martin Poggiolini will act as finance director until Botha starts, Amplats said.
Its shares was little changed at 383.41 rand and has gained 12 percent this year.