[miningmx.com] — ANGLO American Platinum’s shares nosedived on
Thursday and dragged down parent Anglo American, following a worse-than-
expected trading statement from the world’s biggest platinum producer.
Amplats said it was expecting a decrease in headline earnings (HEPS) of between
24% and 34%, flagging safety-related work interruptions and cost pressures. The
broad-based community development transaction it concluded in 2011 accounted for
another R1.07bn charge, Amplats said.
Basic earnings would be hit harder, as the 2010 figures were skewed by a once-off
R4.4bn windfall from the listing of Royal Bafokeng Platinum, as well as an R800m
profit from the sale of the group’s investment in Platinum Group Metals and
Wesizwe’s Western Bushveld joint venture.
By 11:30 on Thursday, Amplats was trading down 3.7% lower at R547.00, recovering
slightly from the 5.3% loss it sustained immediately after it released the statement.
Parent Anglo American traded down 1.37% at R321.52.
Numis Securities, in a note to clients, said the numbers were substantially lower than
what the market expected.
“We knew that the platinum sector [and South Africa in general] is struggling, but
this downgrade is likely worse than the market expects,” read the note. “Consensus
is for around 2,500c HEPS and the bottom of the range is 2,000c; so the update will
disappoint.” HEPS in 2010 were 1,935c.
The impact of safety-related stoppages on the profitability of all platinum producers
in the Western Bushveld was highlighted in a report by JP Morgan Cazenove in
December, after Statistics South Africa reported a year-on-year production drop of
between 27.3% and 36.3%.
“The data at hand suggest to us that there could be some downgrades of earnings
per share forecasts as the mining companies begin to report their production
outcomes, commencing early February 2012,” the group’s analysts said, linking the
surge in stoppages to the establishment of a new Principal Inspector’s office in
Rustenburg. The region was previously overseen by the Department of Mineral
Resources’ Klerksdorp office.
The effect of ongoing cost pressures on its operations was flagged by Amplats in
October, when it revised its unit cost target for 2011 to R12,900 per refined platinum
ounce, from the actual R11,730/oz for 2010. It said the cost increases were primarily
due to increases in the cost of electricity, diesel, steel and labour.
PRICE OF PLATINUM
A number of analysts have also highlighted the closing gap between the cost of
production and the prevailing platinum price, saying the price levels of around
$1,400/oz towards the end of 2011 were unsustainable.
Head of Commodities Research at Standard Bank, Walter de Wet, told Miningmx on
Wednesday that platinum at $1,400/oz was “$100 too low from a cost-of-production
perspective”. Standard Bank predicts an average price of $1,525/oz for 2012.
Platinum has rallied by around 9% since January 9, trading at $1,534/oz on Thursday.
