An Amplats matte tapping and slow cool aisle at one of the company's converter plants. Picture: SUPPLIED
An Amplats matte tapping and slow cool aisle at one of the company's converter plants. Picture: SUPPLIED

The global platinum group metals (PGMs) market is about to receive a renewed flow of metal from the world’s second-largest supplier as it brings its stalled refinery circuit back into production sooner than expected.

Anglo American Platinum (Amplats), which is 80% owned by diversified resources miner Anglo American, declared force majeure on supply contracts in March after its two Anglo converter plants (ACP) broke in quick succession. Amplats used one of the converters, with the other on standby in case there was a problem with the first.

Force majeure is a common clause in a contract that frees companies from obligations in the event of a natural or unavoidable catastrophe.

The converter plants treat the matte material coming from the smelters, extracting iron and preparing it for the refining process in which first base metals are stripped out, then, gradually, each of the six PGMs.

Amplats had set a return date of May 25 for one of the converters to be repaired and for refining to resume. However, the converter will be fully operational by May 12, with the repairs costing R150m, which is within the budget the company set, said new CEO Natascha Viljoen, who replaced Chris Griffith.

“The ACP and full downstream processing operations are completing a safe ramp-up and are expected to be fully operational from May 12. Force majeure to suppliers of concentrate will be lifted on that date,” Viljoen said.

Metal supply force majeure remains

For customers buying metals, the force majeure terms remain in place for the immediate future. Amplats forecast in March that its total refined output for the year would fall by a fifth, or 900,000oz, a number that the company left intact because of the host of uncertainties around restarting its mines under Covid-19 lockdown conditions.

“Due to the time taken to refine the respective PGMs and base metals, the force majeure notice remains in effect for our refined-metal customers. Force majeure arrangements with these customers will be lifted in the future and in line with the provisions of our agreements,” Viljoen said.

Analysts said the restart is good news for Amplats, removing an element of uncertainty around whether it could effect the repairs during lockdown conditions, which made staffing and the sourcing of parts more difficult than normal.

“This would appear to be a negative for PGM prices with supply ramping up into what remains a weak demand environment,” said RMB Morgan Stanley analysts in a note. “However, we would highlight that it may take some time for metal to be refined and sold, and Anglo Platinum’s force majeure to customers remains in place with the release only stating that it will be lifted ‘in the future’.” 

PGM prices have retreated from their pre-pandemic highs at the start of the year, with platinum dropping back below $800/oz as car sales in Europe fall to decade lows. Platinum is used to make anti-pollution devices in diesel engines. Palladium and rhodium are used in petrol engine devices.

Amplats had told third-party miners in SA, including Sibanye-Stillwater and Royal Bafokeng Platinum, that it could not process their concentrate, using the force majeure clause in their contracts. “All temporary commercial arrangements applicable during the force majeure period will revert to normal commercial terms,” Viljoen said.

In March, when Amplats told the market of the converter failures and the stop in refined output, finance director Craig Miller said full-year earnings before interest, tax, depreciation and amortisation (ebitda) would be about R18bn lower at prevailing spot prices than it had been planning for. Amplats posted record ebitda of R30bn in 2019.

Viljoen built her reputation as a minerals processing expert at Lonmin, once the third-largest platinum miner, then during her time at Anglo as head of its processing division.

Amplats has conducted “substantial testing to ensure the stability” of the converter, she said on Tuesday, stressing that all health and safety protocols to keep employees safe amid the Covid-19 pandemic were strictly adhered to during the repairs.

“The company’s ability to continue these essential repairs during the lockdown has been critical to the resumption of the processing pipeline,” she said.

The government enforced a national lockdown from March 27, which stopped all underground mining. Companies with opencast mines, tailings retreatment operations, smelters and refineries were able to continue limited work.

On April 18, the government eased the restrictions on mining, allowing all mines to return to 50% of capacity under strict conditions around the health and safety of mineworkers.

Amplats had continued to operate its Mogalakwena opencast mine on a limited basis during the lockdown as well as its Polokwane smelter.

“As a result of the incidents at the ACP, and the need to shut operations to secure a safe operational environment for employees, the company could not process any metal to final product during this period,” Viljoen said. “With mining activity resuming to varying degrees under the current level 4 lockdown restrictions, the company is now able to begin processing concentrate and releasing metal from the pipeline.” 

Work on the other converter plant is underway and orders have been placed for the long-lead-time items needed for the repairs. The plant is scheduled to return to production in the second quarter of 2021.

Update: May 5 2020 
This article has been updated with company comment throughout.

seccombea@businesslive.co.za

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