• Anglo American Platinum anticipates a 36% to 46% decline in headline earnings for the twelve months ending December 2024, with HEPS projected between 2,889 and 3,421 cents
  • The company cites a 13% drop in realized PGM prices, particularly affecting palladium and rhodium, as a major factor in its earnings forecast
  • Zimplats, a subsidiary in Zimbabwe, reports a 7% production decline, highlighting operational challenges in both South Africa and Zimbabwe's PGM sectors

Harare- The platinum group metals (PGM) sector continues to face significant headwinds, with declining prices and operational challenges weighing heavily on producers. Anglo American Platinum, the world’s leading PGM producers, anticipates a 20% or greater deviation from its previous corresponding period’s results, with headline earnings per share (HEPS) and basic earnings per share (EPS) both experiencing substantial declines for the year ended 31 December 2024.

Its subsidiary, Zimplats has already seen a 7% production decline in its half-year results due to a combination of power cuts and poor PGMs prices.

Headline earnings are expected to decrease by 36% to 46%, falling to between R7.6 billion and R9.0 billion, compared to R14 billion in 2023. HEPS is projected to drop to between 2,889 cents and 3,421 cents per share, down from 5,330 cents per share in the prior period.

Basic earnings are likely to decline by 42% to 52%, settling between R6.3 billion and R7.6 billion, compared to R13 billion in 2023, while EPS is expected to range between 2,395 cents and 2,889 cents per share, down from 4,952 cents per share in 2023.

The primary driver of this decline is a 13% drop in realized ZAR PGM prices, with palladium and rhodium prices falling by 24% and 30%, respectively, in US dollar terms. These price declines have been exacerbated by weaker global demand, particularly in the automotive sector, which is a key consumer of PGMs for catalytic converters.

"The decrease in earnings compared to 2023 is primarily due to a 13% decline in realised ZAR PGM prices," the group said in a trading statement. 

In addition to weaker metal prices, Anglo American Platinum’s earnings were impacted by non-recurring costs totaling R3.5 billion. These costs were associated with operational and corporate restructurings, the demerger of its PGM business, and losses from associates.

A R1.9 billion write-down of assets, primarily related to the coarse particle recovery technology at the Mogalakwena mine, further weighed on basic earnings.

These one-off costs had a significant impact on both EPS and HEPS, reducing them by approximately 1,700 cents and 1,100 cents per share, respectively. The company’s taxation and royalties also declined in line with lower profits, reflecting the challenging operating environment.

While Anglo American Platinum’s operations in South Africa faced significant challenges, its subsidiary in Zimbabwe, Zimplats, also experienced difficulties. Zimplats reported a 7% decrease in production during the period, driven by operational disruptions and lower ore grades.

This decline is particularly concerning given Zimbabwe’s reliance on mining as a key economic driver. Zimbabwe’s PGM sector has been a bright spot in an otherwise struggling economy, with the country holding some of the world’s largest PGM reserves.

However, the recent production decline at Zimplats highlights the challenges of operating in a resource-rich but infrastructure-constrained environment. Issues such as power shortages, limited access to capital, and regulatory uncertainties continue to hinder the sector’s growth potential.

The challenges faced by Anglo American Platinum and Zimplats are emblematic of the broader issues confronting the PGM industry.

Weak metal prices, driven by sluggish demand and oversupply, have eroded profitability across the sector while rising operational costs in both countries have further squeezed margins.

The automotive industry’s shift towards electric vehicles (EVs) poses a long-term threat to PGM demand, as EVs do not require catalytic converters. While PGMs are still essential for internal combustion engine vehicles, the global push for decarbonization and the adoption of EVs could lead to structural declines in demand over the coming decades.

Despite the current challenges, Anglo American Platinum remains committed to operational excellence and portfolio simplification. The company’s strategic priorities include unlocking value from its world-class resource base, improving operational efficiency, and positioning itself for long-term growth.

However, achieving these goals will require navigating a complex and uncertain operating environment.

 In Zimbabwe, the government and mining companies must work together to address infrastructure bottlenecks and regulatory hurdles to unlock the country’s vast PGM potential. Investments in power generation, transportation, and mining technology will be critical to sustaining and expanding production.

The PGM sector is at a crossroads, with declining prices, operational challenges, and shifting demand dynamics creating significant headwinds. Anglo American Platinum’s trading statement for the twelve months ended 31 December 2024 highlights the impact of these challenges on earnings, while developments in Zimbabwe reflects the broader issues facing the industry.

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