Amplats earnings surge on higher metal prices
A hugely improved forecast is largely thanks to better palladium and rhodium values, with a dash of enhanced cost control
Anglo American Platinum expects to report an 80% jump in half-year earnings, bolstered by high metal prices, a weak rand and bold restructuring.
In a trading statement on Tuesday, ahead of the publication of its interim results in July, Amplats said headline earnings for the half-year period will be at least 80% higher than a year before, “primarily due to an increase in the rand PGM [platinum group metals] basket price”.
Basic earnings will also be up at least 180% thanks to the higher prices but also following on from once-off impairments in 2018, the company noted.
The platinum price remains depressed and has languished between lows of $800/oz-$900/oz for more than a year. But other PGMs such as palladium and rhodium that are also mined from these deposits have enjoyed a phenomenal price run. Rhodium prices have gained 41% over the past year, while palladium has jumped 63%.
The rand has continued to depreciate and traded around R14.30 to the dollar on Tuesday afternoon, compared with R13.50 a year ago.
While all SA platinum producers are benefiting from these improved economics, Amplats stands out from its peers.
Rene Hochreiter, mining analyst at Noah Capital, said the rand PGM basket is 80% of the reason behind the improved earnings forecast. “The rest is better cost control,” he said.
Leon Esterhuizen, a mining analyst at Nedbank Corporate and Investment Banking, said Amplats is reaping the rewards of hard decisions taken in the past.
“When the metal prices were lower it took the lead in selling higher-cost operations and streamlining its business for higher-margin production,” he said.
Its highly mechanised open-pit Mogalakwena mine is one of the world’s most profitable PGM mines.
Amplats also cut its debt and is now the highest dividend-paying company in the sector, Esterhuizen said.
The company’s shares, which already trade at a premium to other platinum miners, rose 5.5% to close at R862.45, the biggest jump in more than six months.
Esterhuizen said the earnings estimates are largely in line with what the market expects from Amplats, though somewhat behind consensus.
News of improved performance comes as the sector heads into wage talks. Earlier in June, the Association of Mineworkers and Construction Union tabled an opening demand of a R17,000 minimum wage.
Sibanye-Stillwater, which acquired Amplats’s marginal Rustenburg assets in 2016 and recently completed an acquisition of the embattled Lonmin Platinum, has said the demand is “impractical and unaffordable”.