Amplats ‘cautiously optimistic’ on platinum: Chris Griffith – CEO, Anglo American Platinum

‘All operations unaffected by the strike delivered record production.

HANNA BARRY: Anglo American Platinum, the world’s largest platinum producer, reported results for the year ending December 31. Amplats headline earnings practically halved to R786m off the back of an unprecedented five-month platinum strike. Operating profit was R1.1bn lower than in 2013, ending the full year at R843m.
   Amplats CEO Chris Griffith joins us now. Chris, thank you for you time. A challenged set of results. Was this expected?

CHRIS GRIFFITH: Hi, Hanna, and hi to your listeners. I think if we compare where we were at the end of the half-year, we’d just come of the back of the five-month strike, we were still facing a ramp-up in production, anticipated to take three months, and then expecting to get to normal levels of production. But I think if we’d re-looked then and said this is where we would have been at the end of the year – we would have been very pleased with this outcome. We had a really good ramp-up of our production, we achieved our ramp-up a month ahead of schedule and then we were running at really good production rates, such that our final quarter of 2014 was 12% above where we were in the final quarter of 2013. So all round, we had a really good production comeback.
   And then all of our operations that were unaffected by the strike – so Unki, Mogalakwena, our joint-venture operations, all of those operations delivered record production performances. So outside of the strike period – you raised in your intro the fact that we lost R1bn on operating profit – if you take into account that a loss of 530 000 ounces, which is what the strike cost us, actually relates to almost R9bn in operating profit, the fact the only lost R1bn compared to last year was the result of us being able to sell down our inventory and manage costs at our strike-affected operations.
   So I think notwithstanding the fact that they weren’t a great set of results, the fact that we managed to come in with this set of results compared to the effects of the strike, I think we had not a bad performance. I think it was reasonable.

HANNA BARRY: Absolutely, all things considered. You mentioned selling inventory. Something that interests me because we didn’t see the platinum price blow the lights out during the strike, largely I think in my reading of things, because you could supplement those strike-affected production volumes by drawing down on your existing stockpiles of platinum – what has now happened to this oversupply? Some reports I’ve read suggest that there are stockpiles all over the world of platinum, in Switzerland, for instance. But presumably Amplats has depleted some of its inventories.

CHRIS GRIFFITH: I think that contributes, Hanna, quite correctly, to what we believe are the improving fundamentals of the platinum group metals. A number of years ago, when we announced our restructuring, it was as a result of the fact that we were oversupplying the market – and also with loss-making ounces. So at that point in time, at the beginning of 2013, we made an announcement that we were going to cut back production, cut back on this oversupply because it was depressing prices. We set about doing that, we cut volumes.
   But in the 2012 strikes and 2014 strikes all of those have contributed to reducing this above-ground stock. And then with the anticipation of a long and protracted strike we increased our own inventory levels. That has now been reduced. Where last year we were over 400 000 ounces of refined inventory are now down to 200 000 and it’s roughly at that level that we’ll remain. So all round, the amount of available stock has been reduced very substantially. We are now way below the stock levels that we saw all the way back in 2005, and with these low prices we also anticipate that the liquidity of the remaining stock is now much tighter, giving us every reason to believe that the industry is poised for a response in price to the fundamentals.

HANNA BARRY: So we’re going to see an increase in the price of platinum this year?

CHRIS GRIFFITH: I think there will be a response in price once the macroeconomic environment has got less pressure on the price. So, for example, we are seeing an increase in demand, we are seeing a reduction in above-ground stock and we are seeing all of us doing work about increasing demand further.
   But the fact is, for example, when the US announced the end of quantitative easing you saw what effect that had on the rand/dollar exchange rate. And whenever the rand/dollar exchange rate falls we make more money in rands, and we see a corresponding drop in price. At the same time we are seeing many other macroeconomic events – the oil price reducing, the euro to the dollar exchange rate, which makes the purchase of platinum, even though the prices are down, more expensive in a number of key commodities, the yuan, the yen and the euro. So those big macroeconomic events are still depressing price. But once some of those effects become less dominant, our anticipation is that you’ll see the price responding in line with the fundamentals. Now exactly what time that will be – is it in the second half in this year? – that’s sort of our general feeling at the moment.

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