Platinum miners in deal to handle Amplats shock
Royal Bafokeng Platinum (RBPlat) has revived cash flows for major projects after the shock force majeure announcement by Anglo American Platinum (Amplats) early in March halted the refining of its output.
Amplats, which is the world number two platinum group metals (PGMs) supplier, triggered the clause in its contracts with customers and clients that allowed it to breach the terms because of an event beyond its control.
Amplats had an explosion in February at one of its two converter plants, which treat matte originating from the smelter, removing iron and preparing it for base metals and precious metal refining.
It immediately started its spare converter, but this plant had an inexplicable ingress of water, posing the risk of a lifeendangering explosion in the high-temperature system. This plant should be returned to production in 80 days from the March 10 declaration of force majeure, warning of the loss of 900,000oz of five PGMs and gold, or 20% of its annual output.
RBPlat, which has an agreement to supply PGM-bearing concentrate to Amplats to process through its smelter, converter and refineries, said on Wednesday it is finalising an agreement with its peer to receive a “significant majority” of payments for concentrate deliveries, which it had pegged at between 450,000oz and 480,000oz of platinum, palladium, rhodium and gold for 2020.
“The board sees this as an acceptable arrangement during the period of the event and is pleased with the commitment demonstrated by Amplats ... to the partnership with RBPlat and to mitigate the impact of the claimed force majeure,” RBPlat said in a statement.
RBPlat is 40.2% owned by Royal Bafokeng Holdings, the investment arm of the Bafokeng community on whose land the company operates its Styldrift and Bafokeng Rasimone Platinum Mine and concentrators.
For Amplats, which had R17bn in cash on its balance sheet at end-December, this means paying for metal without being able to refine and sell it.
RBPlat is in the final stages of completing its new R13.8bn Styldrift mine, with capital of R800m for 2020, R300m to expand its Maseve concentrator, R100m for an overland conveyor belt linking its two mines and R300m to upgrade its tailings storage facilities.
Ideally, it would like no disruption to cash flows, but under the agreement with Amplats it would continue concentrate deliveries to the latter’s smelter, which will stockpile matte in front of the converter plant as it is repaired. It will receive partial payment in line with deliveries and the balance once the converter is in operation again.
All outstanding payments would have to be paid by Amplats in full before the end of April 2021.
Sibanye-Stillwater, the world’s largest source of mined PGMs, was also affected by the force majeure, having a toll treatment agreement in place with Amplats for the smelting and refining of its metals for a fee. These metals are then returned to Sibanye to market and sell, unlike the purchase of concentrate type of agreement with RBPlat.
Sibanye has its own smelting and refining plants, but after buying the deep-level, labourintensive Rustenburg mines from Amplats it has opted to pay the latter to continue treating metals through its furnaces and refineries as a way to reduce risk and exposure to the erratic Eskom electricity supply.
Sibanye has agreed to Amplats smelting concentrate from Rustenburg, the small quantities coming from tailings operation Platinum Mile and half of the concentrate coming from the Kroondal pool-and-share assets held with Amplats.
The resultant matte would be sent to Marikana refineries. Marikana will be operating at full capacity of 1.1-million ounces of platinum, more than double what it is processing now.
Metair could commence splitting itself into two in the fourth quarter, separating its European-based acid battery business from its faster-growing SA automotive components maker, MD Theo Loock said on Wednesday.
Splitting the two businesses will allow Metair’s shareholders to attach value to the energy business, whose major asset is Turkey-based lead acid battery maker Mutlu Akü. The automotive components business is locally based, focused on SA vehicle manufacturers.
“The managed separation opportunity can put a value proposition for the energy vertical on the table that the shareholders can associate with.
“Our energy [business] is an international business, with international exposure and international trends,” Loock said.
“We find that some of our shareholders find it difficult to value the overseas business.
Our biggest overseas battery business is in Turkey. They find it difficult to understand Turkey. What is the country risk in Turkey? Is there an exchange risk? That gives rise to noise to our SA-based operation.
“The managed separation will locate the noise in the energy business with a shareholder that understands that noise,” Loock said.
The company, which includes battery manufacturer First National Battery in SA, announced its intention in 2019 to split into two.
The company also announced in December 2019 that it had received unsolicited offers for the energy business and in particular Mutlu Akü.
“We are excited about the opportunities available for both businesses and the board believes that a managed separation of the two verticals could unlock significant value and should be investigated,” Loock said.
He said the company was gathering information about the possible separation of the two units. That would be followed by valuation of the energy business in the third quarter of this year. Depending on the valuation,
Metair would commence with the implementation of the split in the fourth quarter, he said.
In the year ended December 31 2019, Metair reported a 2.7% increase to 336c in headline earnings per share, a widely watched measure of company performance that strips out certain one-off items of revenue.