Amplats rewards shareholders handsomely

Anglo American Platinum (Amplats) reported a sharply increased dividend and improved policy to reward shareholders after a strong year of cash generation from its restructured portfolio.

At its results presentation on Monday, Amplats CEO Chris Griffith said that last week’s Eskom power crisis cost it 14,000oz of platinum production, prompting it to look at building a 100MW solar plant to supply about 20% of its energy needs at Mogalakwena, its most profitable mine.

Amplats, which is the world’s largest platinum miner and is 80% owned by Anglo American, reported post-tax profit of R6.99bn for the year to end-2018 compared with R1.9bn the year before.

Revenue grew to R74.6bn from R65.7bn.

Amplats declared a final dividend of R7.51 per share or R2bn, bringing the total dividend for the year to R11.25 per share or R3bn for the year.

Amplats changed its dividend payment policy because of the strong performance of its business after it sold deep-level, labour-intensive mines, and sold its stakes in a number of joint ventures to focus on low-cost, highly mechanised mines.

“Given our strong balance sheet and greater confidence in the underlying cash-generating capability of the business, we are increasing our dividend payout ratio from 30% to 40% of headline earnings,” Griffith said.

Strong performances in the palladium and rhodium prices offset ongoing weakness in the price of platinum, which Amplats sees in a small market surplus for the year ahead.

The rand price for the basket of platinum group metals (PGMs) coming from Amplats increased by 15% to R29,601/oz.

Amplats ended the year in a net cash position of R2.9bn after starting the period with net debt of R1.8bn.

The company is assessing a number of low-capital, quick-return projects at Mogalakwena and other assets to increase output.

Asked whether this would be expansion in a market that could not absorb much more platinum, Griffith said the medium-to longer-term outlook for the metal was positive.

Platinum would have to be used in autocatalytic devices on petrol-engine exhausts because there was simply not enough palladium to meet demand, leading to the palladium price overtaking that of its sister metal for the second time in history.

Platinum is primarily used to make autocatalysts for diesel engines. Carmakers would seriously consider substituting expensive palladium, which has been in a market deficit for a number of years, with platinum, Griffith said.

Amplats expects to produce up to 4.5-million oz of PGMs in concentrate during 2019 and have refined output of up to 4.9-million oz of PGMs as it worked through stockpiled material from 2018.

Platinum would account for 2.3-million oz of refined metal and palladium 1.5-million oz.

Amplats generated 4.8-million oz of refined PGMs in 2018, a 6% decrease because of planned smelter rebuilds, while sales of 5.2-million oz of PGMs were recorded for the year.

Eskom remained a concern for Amplats, he said.

Amplats had to shut down between 40MW and 80MW per day of consumption, losing 14,000oz of platinum or 28,000oz of PGMs to the curtailed power in the week starting February 11, he said.

He stressed this metal could be recovered if there were no more curtailments during the course of the year.

Amplats is considering building a 60MW solar plant at Mogalakwena in Limpopo and this could be expanded to 100MW, but Eskom had to approve anything bigger than 10MW, Griffith said, pointing out this was a long-dated project.

Amplats uses about 500MW of power, with smelting and refining accounting for 235MW, mining 110MW and concentrating 150MW.

seccombea@businesslive.co.za