BHP’s failed bid to takeover Anglo American earlier this year came with several proposals, which showed less interest in the group’s diamond, iron ore and platinum business.
Anglo has since revealed its plans to demerge Anglo American Platinum (Amplats), which has operations in South Africa and Zimbabwe, to optimise shareholder value.
It said in a statement last May that its portfolio and structure are simpler without Amplats, adding that the group's portfolio will have a strong geographic balance and less complexity in future capital allocation.
Rough&Polished contacted Amplats to comment on this and other issues but was referred to the company’s 2024 interim results.
The company said in its results statement that it sees significant potential opportunities as a standalone company.
Amplats said it could build from strong foundations across the platinum group metal (PGM) value chain – from its world-class mines to its well-established and fully invested processing infrastructure.
Below are excerpts from the interim report.
What is the possibility for Amplats to operate independently of Anglo?
The potential opportunities before us as a standalone company are significant. We have all the credentials to continue to thrive: world-class mines, leading mineral endowments, and strength across the value chain with our know-how, processing assets, and global marketing capabilities focussing on superior sustainability, innovation, and market development. We are excited about our prospects as a standalone company. We can build strong foundations across the PGM value chain—from our world-class mines to our well-established and fully invested processing infrastructure through to our global marketing—from an organisation proudly based in South Africa.
We will work to embed the capabilities that remain critical for us as a standalone company and position the company to take advantage of increased focus and agility, making the most of the pathways to value available to us. We therefore approach the future with confidence and look forward to working with our shareholders and stakeholders to make that a reality. We are optimistic about the long-term outlook for the PGMs we produce, which play an important role in creating a greener world, including their many actual and potential prospects for growth in applications from fuel cells and battery technology to medical technologies.
We will work to deliver a responsible and orderly demerger, considering the best interests of all stakeholders, by the end of 2025. Our management team and independent board are already working constructively with Anglo American to achieve this. Our focus alongside the demerger initiatives will be on ensuring safe and resilient operational and financial performance through a focus on delivering returns in any price environment through cost competitiveness, cash flow generation and returns underpinned by a clear commitment to operational excellence.
How did Amplats respond to an uncertain macroeconomic and a low PGM price cycle in the first half of the year?
The company responded decisively to an uncertain macro-economic and a low PGM price cycle by restructuring the business in pursuit of operational excellence, increased levels of productivity, and ensuring cash-generation capabilities (value over volume) while maintaining the future growth optionality of our operations (pathways to value). These initiatives include our sustainable cost-out programme, which is expected to deliver R10 billion in annual cost savings from operating costs and stay-in-business capital from a 2023 baseline. Approximately R4.7 billion has been achieved in the first half of the year.
How feasible is your target to deliver R10 billion in annual cost savings?
We expect to maintain cost reduction run rates achieved in the first half of the year in the second half of the year, which will be further supported by additional value realisation from the successful completion of the Section 189A restructuring process at the end of June 2024. Monthly cost benefits flowing from the operational restructuring for permanent employees are expected to be ~R120 million per month or ~R1.5 billion on an annualised basis.
What is the impact of reduced costs on your cash operating cost per unit?
Cash operating costs per PGM ounce increased by 1% to R18,280 per PGM ounce in the first half of 2024 due to 12% lower own-mine production, which was substantially offset by the cost reduction flowing from the cost-out programme.
What was the state of the PGMs market in the first half of the year?
PGM prices were lower in the first half of 2024 than in the same period of 2023, with a smaller decline compared to the second half of 2023. The realised basket price was US$1,442, down 24% compared to the first half of 2023 but only 1% lower than the second half of 2023, suggesting growing price stability. Platinum averaged US$945 per ounce (London settlement price), a modest 6% lower year-on-year, and 2% higher than in the second half of 2023. The palladium price dropped 35% year on year, averaging US$976 per ounce. Additionally, there was a 17% decline compared to the second half of 2023, with the price experiencing only brief rallies within a prevailing downward trend. Rhodium (JM base price) saw a significant year-on-year decrease of 49%, at US$4,602 per ounce. However, it rebounded 7% compared to the second half of 2023, having found stability around mid-2023 after a substantial first-half fall. In the first half of 2024, the minor PGMs showed contrasting trends. Iridium (JM base price) averaged US$4,888 per ounce, reflecting a 6% increase compared to the first half of 2023. On the other hand, ruthenium (JM base price) averaged US$434 per ounce (JM base price) which represents a 7% decline over the same period.
What is the outlook of the PGMs market?
Our and other analysts’ expectations for the market balances of the three main PGMs over the next few years are tighter than they were at the beginning of 2024. This reflects three things – first, mine supply is likely to be lower given announced and expected production, cost and capex cuts, second, recycled supply looks to be recovering from its present slump slower than expected, and third, automotive demand is forecast to remain more robust due to slower growth in the BEV share of new vehicles. Such revisions do not markedly change the direction of travel for each metal, though they do raise the potential for unexpected bullish outcomes, and hence the prospect of price volatility. We expect platinum to be in deficit over the next few years.
Given its importance to overall demand, the most consequential factor remains the outlook for automotive PGM demand. There are three main considerations – the number of vehicles produced, the proportion of those that have PGM catalysts, and the amount of PGM on those catalysts. Demand for PGMs in industrial applications will grow in the medium term, supported by rising industrial production, the clean-energy transition and a growing, and more discerning, global middle-class population.
Demand from the hydrogen economy, for which PGMs play many roles, is set to be a broad sector with strong growth. The installation of PEM electrolysers, which make green hydrogen and use PGM catalysts, has been strong in recent years and is already an important demand sector for iridium. Growth in the next few years should remain rapid, though some higher-end forecasts were cut given some sluggishness from the hydrogen demand side. In the medium term, PEM fuel cells, which convert hydrogen to electricity, offer the largest upside potential for demand, and manufacturers continue to launch new light fuel cell vehicles, including Honda and Toyota with passenger vehicles and several Chinese marques in the light commercial sector. The supply side of PGMs is more uncertain now than it has been for many years. Underlying mine supply is likely to decline given already announced shaft closures or mine replanning in response to falling basket prices, and cuts to staffing and capital expenditure are likely to take a slow toll. Further production cuts seem likely if PGM basket prices do not improve.
What is the state of the platinum jewellery market?
The platinum jewellery market is both much smaller and more geographically diverse than it was 10 years ago as the Chinese market has shrunk, partly offset by growth in the USA, Europe and India. In Q1 2024, China’s platinum jewellery demand continued to decline, but it stabilised in Q2 2024. There is growing optimism among traders and analysts that platinum volumes may finally reach a bottom this year. One contributing factor is the high price of gold, which, while still a strong competitor, is prompting consumers and jewellers to consider alternative options. In established regions, like the US and Europe, current high volumes are expected to remain stable, while the Indian market continues to enjoy double-digit percentage growth in fabrication volumes.
Can you shed more light on the Inoveo Platinum?
We co-developed an innovative new platinum alloy, Inoveo Platinum, together with Alloyed, a UK-based materials designer and developer. Established as a brand by Platinum Guild International (PGI) USA, Inoveo Platinum was launched at the JCK trade show in Las Vegas in May. Inoveo Platinum has all the benefits of platinum, with the workability of white gold, and will be available exclusively from Stuller, a leading US jewellery manufacturing supplier, whom we have previously partnered with to sell responsibly mined platinum grain to the US market.
What is your production guidance for the year?
We expect to maintain a total M&C production of 3.3 million – 3.7 million PGM ounces. M&C production from own-mine operations including our 50% share of Modikwa will remain around current production levels of between 2.1 and 2.3 million ounces (Moz). POC from third parties will remain at around current levels of 1.2 – 1.4Moz.
Mathew Nyaungwa, Editor in Chief, Rough&Polished
