Amplats puts mines up for sale

As five-month long platinum strike hits profit.

Anglo American Platinum, the world’s largest producer of the metal, said it will seek buyers for some mines after first-half profit dropped 88% as a five-month strike in South Africa disrupted mining.

Amplats, as the Johannesburg-based unit of Anglo American is known, is putting four mines and possibly two joint ventures up for sale, it said in a statement today. It will retain the Mogalakwena open-cast mine, the company’s largest, three other operations and four stakes in joint ventures.

Amplats has had “a number of suitors” for the assets, Chief Executive Officer Chris Griffith said on a conference call. “We are in the early stages of the process, so there’s no specific timeline to completion at present,” he said. “We are already in consultation with government.”

The strike by more than 70 000 miners at Amplats, Impala Platinum and Lonmin cost workers R10.6 billion in wages by the time it ended of June 24. The stoppage pushed South Africa’s economy into contraction in the first quarter as mining output plunged in the country that accounts for more than two-thirds of the platinum extracted globally.

Amplats said in January 2013 it planned to sell the Union mine and concentrators, north of Rustenburg. The company has yet to find a buyer for those assets.

The proposed sales will cut its workforce by more than half, reducing the headcount of 50 000 by about 27 000, Griffith said.

Portfolio restructure

“This is not a decision to exit these assets as a result of the strike,” Griffith said at a separate presentation today. “This is a continuation of the restructuring and the repositioning of our portfolio that we announced already at the beginning of 2013.”

Amplats intends to exit its three Rustenburg operations and the Pandora joint venture. It will retain the remaining smelting and refining assets at both Union and in Rustenburg, today’s statement shows. It will consider selling its stake in the Bokoni venture with Atlatsa Resources Corp.

“This is not a fire sale,” Griffith said. “We would prefer to sell the assets and we think that there is a realistic market there, but it clearly isn’t the best time in the world to be trying to sell assets. If we were unable to realize value through a sale, there is the option and a widely used option of listing these assets but that in itself is not our preferred option.”

Shares climb

Amplats rose as much as 4.4%, and was 4% higher at R475.56 at 12:26 p.m. in Johannesburg. The stock has advanced 21% this year.

“I don’t think there will be that many buyers going around,” Albert Minassian, an analyst at Investec in Cape Town, said by phone. “Even if they sell at a reduced price, the shares may rise because they’re getting rid of something that’s problematic.”

Earnings per share excluding one-time items fell to 60 South African cents in the six months, from R5.14 a year earlier, Amplats said today. Net income dropped to R157 million from R1.3 billion in 2013, it said.

Platinum sales decreased to 1.04 million ounces from 1.07 million ounces a year earlier as output slumped 39% to 715 200 equivalent refined ounces. Amplats used stockpiled metal to meet its commitments to users during the strike.

“Contractual supply to customers was uninterrupted,” Amplats said.

Cost increase

Cost of sales increased 27% to R26.9 billion as the company spent R4.1 billion on its strike-hit operations without deriving revenue from sales, Amplats said.

Platinum for immediate delivery fell 7.1% to an average $1,438 an ounce in the first half from a year earlier.

“Demand growth and significantly reduced South African mining supply due to the strike will result in a platinum market deficit of more than one million ounces,” the company said.

Capital expenditure increased 17% to R2.8 billion and no dividend was paid, Amplats said.

Refined output and sales will be 2 million to 2.1 million ounces because Amplats expects its post-strike production to reach a “steady state” by the fourth quarter, it said. The company previously estimated production at 2.1 million ounces.

©2014 Bloomberg News


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