Platinum group metals (PGMs) mining, refining and marketing company Anglo American Platinum (Amplats), which on Monday delivered an outstanding set of dividend-yielding financial results for the six months to June 30, is taking steps to reverse unjustified investor bearishness.
After the company reported improved free cash flows and capital return of 22.4% at a time of subdued platinum pricing, Amplats CEO Chris Griffith made it plain at question time that the perceived heavy dependence of platinum on diesel cars in Western Europe is being overplayed. (Also watch attached Creamer Media video).
Net platinum demand is made up fairly equally between industrial demand, which is currently very strong, autocatalyst demand, which has been negatively impacted by anti-diesel sentiment in Western Europe, and jewellery demand, which is stabilising.
In the autocatalyst part of the business, the Western Europe light-duty diesel segment represents half of one-third in demand terms.
“Absolutely, you’re seeing some decline there, but heavy-duty diesel demand is continuing to grow and, outside of Western Europe, you’re seeing light-duty diesel continuing to grow as well,” Griffith said in response to Mining Weekly Online.
“If you look at the use of platinum in diesel catalysts, it’s actually pretty strong, but you don’t get that message out to investors,” New York-based CPM Group managing partner Jeffrey Christian commented to Mining Weekly Online. CPM, a commodities market research, consulting, financial advisory and asset management firm, has four decades of insight into platinum demand.
In the short term, the company foresees that heavy-duty diesel demand offsetting the light-duty diesel decline at a time of strengthening potential for industrial demand and stabilising global jewellery demand.
Pressures are building for ship emissions to be curbed with the help of platinum, which would amount to a substantial and price inelastic use of the metal.
The company’s internal PGMs investment fund has built a strong track record of building industrial demand for platinum by investing $60-million into seven companies.
This thrust has now been moved up a gear by the creation of the R2.6-billion venture capital company AP Ventures, in which South Africa’s Public Investment Corporation is a co-investor at R1.3-billion, and the company also had autocatalyst systems, jewellery and placards on fuel cell development on display at the JSE auditorium where its interim results were presented, reporting a strong performance from its Mogalakwena mine, which contributed R2.1-billion in economic free cash flow, up from R812-million in the corresponding six months of last year.
Its Unki mine in Zimbabwe achieved free cash flow of R311-million in the period at a margin of 33%.
It has secured Glencore’s 39% interest in the Mototolo joint venture for less than replacement cost and now has majority ownership of a fully mechanised mine, the acquisition enabling many synergies with the downdip and adjacent Der Brochen resource and providing a 30-year-life hub for the company.
The company’s balance sheet has been de-leveraged with net debt reducing from R14.8-billion in 2014 and shareholders receiving an interim cash dividend of R1-billion.
Amplats CFO Ian Botha reported that 60% of first-half revenue arose from metals other than platinum, with higher palladium prices adding R1.8-billion, higher rhodium prices adding R1-billion and higher ruthenium and iridium prices adding R700-million.
The turnaround plan at Amandelbult continues, showing early benefits of 9%-higher 432 600 oz of PGMs, and Unki is up by the same percentage to a record 92 600 oz.
Headline earnings increased to R3.4-billion as Amplats remains focused on the next phase of growth by simplifying its portfolio and building a platform for future value.
- Mining Weekly
