Glencore sells stake to Amplats

After a robust interim financial performance‚ Anglo American Platinum declared a R1bn dividend and an upfront cash payment of R800m to buy Glencore’s stake in the Mototolo joint venture.

The world’s largest platinum miner has undergone an extensive restructuring exercise‚ selling deep-level‚ labourintensive mines to focus on mechanised‚ shallower‚ more profitable assets‚ and that strategy is now yielding benefits.

Over the past five years‚ Amplats has cut its mines to seven from 18 and its workforce by 60%‚ mainly through asset sales, while maintaining its production levels.

It resumed interim dividend payments‚ returning R3.74 a share to investors‚ the first halfyear payment since 2011.

Amplats declared a post-tax profit of R2.28bn for the six months to end-June‚ compared with a R1.3bn loss the previous year‚ with revenue growing by R6bn to R33.5bn.

It has 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.

There was an 18% improvement in the rand prices for the basket of metals Amplats produced compared with a year earlier‚ with palladium the standout performer‚ reaching record highs during the interim period‚ CEO Chris Griffith said.

Amplats sold 2.51-million oz of platinum group metals during the period‚ up 3% from a year earlier.

The average rand price for these sales increased by 14% to R12‚777/oz.

Marking the final chapter in Glencore’s presence in platinum‚ the companies agreed Amplats would buy Glencore’s 39% stake in Mototolo for an upfront payment of R800m cash and six-monthly payments over a six-year period.

The net present cost of the transaction is R1.5bn‚ including the R800m upfront payment‚ said Amplats CFO Ian Botha.

The key strategy behind the purchase is not the Mototolo mine‚ but the infrastructure that unlocks the nearby‚ undeveloped Der Brochen property owned by Amplats.

“The acquisition of Glencore’s stake in the Mototolo joint venture increases Anglo American Platinum’s interest in a mechanised‚ low-cost‚ high-quality resource‚ creating another major PGM [platinum group metals] hub for the company‚” Griffith said.

“The transaction unlocks significant optionality for the company in its wholly owned Der Brochen resource.”

He said it would extend Mototolo’s life to 30 years.

Mototolo is one of the highest-margin‚ safest mines in the Amplats stable‚ with a profit margin of 43%.