Amplats earnings may fall 96%

Published Jul 15, 2014

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Anglo American Platinum (Amplats), the world’s biggest platinum producer, warned yesterday that the five-month wage strike would sink earnings by up to 96 percent in the six months to June compared with the same period last year.

Amplats’s earnings slump should not come as a surprise after Statistics SA released May’s sales and production figures showing platinum group metals (PGM) recorded the largest declines, noted Sibonginkosi Nyanga, a mining analyst at Imara SP Reid.

PGM output slumped by 48.5 percent while production of “other” non-metallic minerals slid 13.3 percent in May, Stats SA said last week. Overall mining production dropped by 6.5 percent year on year in May.

The Imara report released yesterday said Amplats management would focus on its key assets: the Mogalakwena, Unki and Twickenham mines.

“As things stand, the reserve life at the open-pit Mogalakwena [mine] is over 110 years at the 600 000 ounces a year production level.

“As Mogalakwena grows, we think Amplats will be better placed gradually to reduce headcount at its labour-intensive mines than any of its major peers, which puts it [in] a favourable competitive position,” said the report.

The report said the strike accelerated the market into a sustained deficit, which would possibly lead to PGM price increases.

Amplats said yesterday that it expected headline earnings per share (HEPS) in the six months to June 30 to decline to between 20c and 80c from R5.14 the previous interim period.

Amplats shares declined 2.04 percent to close at R466.50 on the JSE yesterday.

Basic earnings per share (EPS) were likely to decrease to between R1.30 and R1.80 from R4.68 for the comparative period, the company added.

“The decrease in HEPS and EPS is primarily due to the impact of the five-month industrial action, which impacted on operational performance,” the Anglo American subsidiary said in a statement.

Basic earnings for the period included a gain of R243 million (equivalent to 93c a share) arising on the final phase of the refinancing transaction with Atlatsa Resources Corporation, it said.

On January 23 the company’s Rustenburg, Amandelbult and Union operations ground to a halt as 70 000 members of the Association of Mineworkers and Construction Union downed tools to demand a monthly basic wage of R12 500, up from R4 500.

The strike ended last month with the signing of a three-year agreement in which the lowest-paid underground employees received a 20 percent increase.

The strike cost employers Amplats, Lonmin and Impala Platinum R24 billion in revenue and staff lost R10.7bn in wages, according to a website supportive of the producers.

Restructuring of the mines is expected to follow the longest strike in South Africa’s history.

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