Amplats pays its first dividend in six years
• Cuts net debt to R1.8bn from R12.8bn in 2015 • Miner in a position to consider growth projects
Anglo American Platinum slashed billions off its net debt and declared its first dividend since 2011 as it wrapped up its restructuring programme to repair its balance sheet and remove unprofitable mines.
The benefit of removing 470,000oz of marginal or unprofitable platinum from its portfolio enabled the 80%-held Anglo American subsidiary to cut net debt to R1.8bn from R12.8bn in 2015, as well as return R900m to shareholders.
The improved cash flow of R2.4bn from its mines, 70% of which are on the first half of the industry cash curve, together with R1.1bn from asset sales in 2017 and customer prepayments of R2.6bn not only allowed for the first dividend payment in six years, but positioned Amplats to seriously consider growth projects.
“It would be our preference to fund our growth off our balance sheet. We are getting ourselves into a position where we could do that,” said Amplats CEO Chris Griffith.
“We have seen a nice underlying cash generation from our assets. Before paying the dividend, we needed to get a sense that the underlying business was generating enough cash.
“But it feels to me that if and when we make a choice to pull the trigger on one of our projects we have the balance sheet to do it,” he said.
As the largest producer of platinum, supplying 40% of the world’s mined metal, Amplats was poised to expand its flagship open-cast Mogalakwena mine or build a new mine at its Der Brochen deposit near Steelpoort in Limpopo.
The Der Brochen deposit has been in the Amplats stable for nearly two decades, with talk in 2003 of a mine coming into production during 2006.
The undeveloped Der Brochen deposit on the southern tip of the Eastern Limb of the Bushveld Igneous Complex, the world’s richest source of
platinum-group metals (PGMs) and chrome, has now been revisited in a two-year study that will be completed at the end of 2019 and weighed against the Mogalakwena expansion.
Mogalakwena could add up to 250,000oz of platinum a year if a concentrator the size of the North plant was added. The cost of the project could be about R8bn to R9bn.
Der Brochen could be a replacement of the Mototolo joint venture mine to the immediate north of the deposit and which had three or four more years of life, and Amplats was studying options around the best way to bring the resources to account, Griffith said.
Another contender for group capital is the Unki mine in Zimbabwe, where the departure of Robert Mugabe as president has resulted in a more favourable investment message.
Unki could double its output of PGMs from the 166,000oz coming from the mine in 2017, said Griffith. Amplats was nearing the completion of an R800m smelter at the mine to upgrade concentrate and avoid punitive export tariffs on concentrate sent to SA for processing.
Asked if Amplats would consider offshore opportunities as its peers Sibanye-Stillwater and Northam Platinum had done, buying mines and recycling businesses in the US, Griffith said exploration in China, Finland and Russia had merely proved it was in the right place. “We’ve married the prettiest girl there is, so why would we want an ugly girlfriend now,” he said.
He ruled out any further asset disposals or sales or swaps of resources as it had done with a block of ground at its Tumela mine in the Amandelbult complex north of Thabazimbi in a deal with Northam.
Northam CEO Paul Dunne said last week Northam would like to consolidate the Amandelbult mines into its Zondereinde mine in the remote northern reaches of the Western Limb of the Bushveld Igneous Complex.
Griffith said there was no chance of Amplats letting its second-largest mining operation go and that it was working hard to bring the asset into the first half of the cost curve.