Amplats to report interim profit trebled due to higher metal prices

Anglo American Platinum (Amplats) will report that interim profit more than tripled because of higher metal prices, as the company heads into what could be difficult wage talks with a militant union.

Amplats, the world’s second-largest source of platinum behind Sibanye-Stillwater, has started wage talks with the Association of Mineworkers and Construction Union (Amcu), a self-proclaimed militant union that is demanding basic salaries be increased to R17,000 a month, from about R11,500.

Amplats and Impala Platinum have now both advised the market to expect higher profits than a year ago because of improved prices for palladium and rhodium, which are included in the basket of platinum group metals (PGMs) that SA companies mine.

Amplats said its basic earnings for the six months to end-June would be in a range of R7.055bn to R7.485bn, compared to R2.18bn in the same period a year earlier. This translated to earnings per share of between R26.90 and R28.54, versus R8.31 a year ago.

Not only was profit driven by the higher price for the basket of metals Amplats produced, but there was a R1bn gain resulting from a stock count adjustment versus a R500m loss in the same process a year earlier.

Amplats undertakes an annual calculation of the metals moving through its processing pipeline, assessing what is in its concentrators, smelters and precious metals refinery to estimate the value of those metals. The precious-metals refinery calculation is done once every three years, and was done in the first six months of 2019.

These stock numbers are included in the interim results every year.

Further skewing the previous interim period’s numbers were a R600m impairment taken against the one-third stake in the Bafokeng Rasimone Platinum Mine joint venture, and an R800m loss on the sale of Union mine and Masa Chrome to Siyanda Resources.

Accounting for the once-off items, headline earnings for the period were forecast to more than double to between R7bn and R7.67bn for the interim period, compared to R3.36bn before.

Amplats, Implats and Sibanye are the three largest platinum miners engaged in wage talks with Amcu, which is the dominant union at their mines.

Amplats CEO Chris Griffith has pointed to an improved working relationship with Amcu and the reduction in the company’s exposure to labour-intensive mines with the sale of the Rustenburg mines to Sibanye and Union to Siyanda.

Sibanye has concluded an all-share transaction to take over Lonmin, a deal that was fiercely opposed by Amcu.

There is a good deal of bad feeling between Amcu president Joseph Mathunjwa and Sibanye CEO Neal Froneman, after a five-month strike at Sibanye’s gold division by the union ended with little to show for the 14,000 people who downed tools to demand a better wage settlement than the one agreed with three other unions in November 2018.

Amplats is expected to formally respond to Amcu after the results released on July 22. It is unable to do so any earlier because the counteroffer and the justification behind it would include data not available to investors in the company.

Analysts are divided on what Amcu’s bloody nose in the gold strike would mean for these talks, which come ahead of Amcu’s September national conference where there will be a leadership vote.

Unlike in the Sibanye gold division, where it was toppled from a narrow majority and displaced by the three other unions, Amcu is a clearly dominant union in the platinum industry and carries far more clout.

Amcu called its members out on a five-month wage strike in 2014, when its rallying call was for a R12,500 a month basic wage. The strike by some 70,000 workers stripped one-million ounces of platinum supply worth about R24bn at the time out of the market.

seccombea@bdfm.co.za