Amplats slashes its net debt
Despite low-price environment
ANGLO American Platinum (Amplats), the world’s biggest platinum producer, slashed net debt in the half year to June, despite the low pressure environment. Amplats, a subsidiary of Anglo American, yesterday said it had generated R4.3 billion in cash and that net debt in the first half of 2017 had been reduced to R5.9bn from R7.3bn at the end of December 2016.
ANGLO American Platinum (Amplats), the world’s biggest platinum producer, slashed net debt in the half year to June, despite the low pressure environment.
Amplats, a subsidiary of Anglo American, yesterday said it had generated R4.3 billion in cash and that net debt in the first half of 2017 had been reduced to R5.9bn from R7.3bn at the end of December 2016.
“The reduction in net debt was driven primarily by a reduction in working capital,” Chris Griffith, Amplats chief executive said.
The platinum price fell to $957 (R12 353) an ounce in the first half of 2017 from $971 in the first half of 2016, partially as a result of a stronger US dollar following expectations that the US Federal Reserve will increase interest rates in the second half of 2017.
Griffith described the prices as being the lowest since 2013.
“We are managing the business for a low price environment. We continue to reduce costs, and improve productivity,” he said.
Low prices have seen Amplats cut close unprofitable shafts, including the Rustenburg, Twickenham and Marikana operations. The company also decided to place the Bokoni mine on care and maintenance and was also selling its Union mine to a subsidiary of Siyanda Resources and its share of the Pandora joint venture to Lonmin.
“Where assets are not cash positive, one has to make tough decisions,” he said.
Griffith also said in the current low price environment the focus was on assets that required low capex and offered quick returns, including the chrome plant that was built in the Amandelbult Mine.
The focus has shifted to continued disciplined capital allocation and the deleveraging of the balance sheet is a priority, the company said. As a result Amplats withheld the dividend in the period citing future capital funding requirements in an uncertain macroeconomic environment.
“The focus remains on optimal stay-in-business capital allocation and the company would like to re-introduce a sustainable dividend once the balance sheet has strengthened. In the current environment the focus will be on low capital, fast-payback and value accretive projects,” Griffith said.
Earnings before interest, taxes, depreciation and amortisation before impairments, were R4bn, down 26 percent compared with R5.4bn in the first half of 2016.
It said that uncontrollable items – which include inflation, US dollar metal prices and the rand-dollar exchange rate – reduced earnings by R1.5bn.
Rene Hochreiter, a mining analyst at Noah Capital Markets, said that Amplats had posted a good set of results under the circumstances.
“Cash flow is expected to remain flat. The platinum price will also remain flat. I do not expect any excitement in the second half of the year, but not negative,” he said.
Seleho Tsatsi, an investment analyst at Anchor Capital, said Amplats was better placed than the majority of peers for the current low price environment.
“They’re a lower cost miner than the likes of Implats and Lonmin,” he said.
The company also reduced debt and did not pay shareholders dividend.
Amplats shares were down 1.94 percent to close at R305.47 on the JSE yesterday.
Chris Griffith, the chief executive of Anglo American Platinum, the world’s biggest platinum producer, says the company’s reduction in net debt is driven primarily by a decrease in working capital.