Amplats to pay dividend and buy stake in mine
In stark contrast to two of its major peers, Anglo American Platinum has a solid balance sheet, allowing it to pay an interim dividend of R1bn — the first since 2011 — and buy Glencore’s stake in a strategically important mine for an upfront payment of R800m cash.
Impala Platinum and Lonmin, the second and third largest platinum producers respectively, are in far worse shape, facing mine closures, the dismissal of thousands of workers, and in the case of Lonmin, hoping for a successful takeover bid by Sibanye-Stillwater to stave off a breach of debt covenants that could destroy the company.
The world’s largest platinum producer has swung to an interim net cash position after selling or closing deep-level mines and unprofitable assets, reducing its portfolio to seven mines from 18 and cutting its workforce by 60% in five years, mainly through disposals.
Amplats, which is 80% owned by Anglo American, returned R1bn to shareholders, declaring a R3.74 per share interim dividend after swinging to a post-tax profit of R2.28bn for the six months to end-June, compared with a R1.3bn loss the previous year. The company’s revenue was more than R6bn higher at R33.5bn.
Amplats swung to a net cash position of R477m from net debt of R5.9bn a year earlier. In 2014, net debt stood at R14.8bn.
Amplats was starting to look seriously at growth options, particularly at its open-cast Mogalakwena mine, the most profitable platinum metals group mine in the world, as it prepares to fold its undeveloped Der Brochen property near Steelpoort, Limpopo, into the Mototolo mine.
Amplats said on Monday it had agreed with Glencore to buy the global commodity trader and miner’s 39% stake in the operation for about R1.5bn, with R800m upfront and the balance paid over six years.
The second tranche of pay- ments will be linked to platinum group metal prices.
Amplats will soon access Der Brochen via existing infrastructure, possibly building a new R2bn shaft, ahead of a major expansion that would entail an additional concentrator and related plant equipment.
“Amplats … is adding to output at a time when peers in the industry are cutting production and jobs,” said SP Angel analyst John Meyer.
Amplats CEO Chris Griffith said the major expansion at Mogalakwena, which would involve building a third concentrator at an indicative cost of up to R12bn, would increase palladium output by 270,000oz a year and platinum by 250,000oz on top of the roughly 500,000oz of each metal coming from the mine now.
There is a gaping and continued deficit in the palladium market that reached a shortfall of 800,00oz in 2017.
Mototolo is one of the safest, highest-margin mines in the Amplats stable, with a profit margin of 43% and output of 130,000oz of platinum a year.
The remaining shareholder in Mototolo is Kagiso Tiso Holdings, with an 11% stake, which Amplats might buy for R350m, Griffith said.