BUSINESS MAVERICK

Amplats sees 2019 headline earnings up by as much as 150%

By Ed Stoddard 28 January 2020

Anglo American Platinum CEO Chris Griffith. (Photo: Felix Dlangamandla / Foto24 / Gallo Images / Getty Images)

It’s a good time to be an Anglo American Platinum (Amplats) shareholder. The Anglo American unit has just issued a trading statement flagging stellar results as its turnaround gains momentum, boosted by robust prices.

Amplats expects its headline earnings and headline earnings per share for 2019 to rise between 131 and 151%, the company said in a trading statement on Tuesday 28 January. It said headline earnings were likely to fall between R17.545-billion and R19.055-billion. Its 2018 headline earnings amounted to R7.588-billion. Its results are still being finalised and will be released on 17 February.

This was not unexpected. The company said last week that platinum group metals (PGM) production was up 1% in 2019, but the devil is in the detail. Production at its cash-spinner, Mogalakwena, a mechanised, open-cast and relatively low-cost operation, rose 4%. But the real icing on the cake was prices. The rand basket price for the PGMs the company produces increased 38% in 2019, a trend that clearly flowed directly to the bottom line. 

Palladium is the main driver on this front. Its price recently spiked to a record above $2,500 an ounce, bringing its gains over the past four years to around 500%. It is the favoured catalyst for petrol engines and its supplies are widely regarded to be way short of demand. Sibanye-Stillwater and Impala Platinum have also made palladium pivots that are paying off or will soon. At the same time, labour unrest has decreased – platinum wage talks last year were sealed without a strike, unlike in the past when Amcu led often violent stoppages of up to five months. Still, wider social and community unrest remains an issue, notably on the eastern limb of the platinum belt. 

Amplats under CEO Chris Griffith also shed the bulk of its labour-intensive operations, with Sibanye snapping them up, as the Anglo American unit launched a mechanisation drive. There were huge costs in that. The equipment and research and development all come with very high price tags. 

But that move is now paying dividends in more ways than one. Amplats in 2019 recorded its first calendar year with no one killed on the operations that it manages. Safety and wider social and governance issues are a growing concern among shareholders. Companies with poor safety records will find themselves increasingly shunned, while capital will be directed to those with stellar safety records. 

On that note, 2019 is now the benchmark year for safety on South Africa’s mines, with 51 deaths recorded, a record low. And Sibanye just announced that its gold operations achieved 10 million fatality-free shifts, a first in deep-level, conventional bullion mining in South Africa. 

So amid all of the doom and gloom, there is some good news emerging from the South African mining industry. BM

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