Anglo American’s platinum unit cuts output forecasts Guidance comes after closing South African proc6 Mar 2020 13:03
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Anglo American’s platinum unit cuts output forecasts
Guidance comes after closing South African processing plant
Shares in Anglo American fell after the miner’s platinum arm cut production forecasts following the closure of a key processing plant in South Africa.
Anglo American Platinum, which is 80 per cent owned by the London-listed miner, said it would not be able to honour customers’ contracts after shutting its entire converter plant in Rustenburg.
Shares in the London-listed group were recently down nearly 7 per cent in Friday trading at 1,717p. Earlier they dropped by more than 9 per cent, which would have put them on course for their biggest one-day percentage fall in four years.
Amplats said it now expects to produce 1.5m to 1.7m ounces of platinum this year, against an earlier forecast of 2m to 2.2m ounces, and 1.1m to 1.2m ounces of palladium, down from 1.4m to 1.5m.
The closure of the Anglo Converter Plant could lead to a fresh surge in the price of palladium, which is produced alongside platinum.
Palladium rose 3.3 per cent to $2,615 an ounce, while platinum jumped 4.1 per cent to $900 an ounce on Friday.
“Our first pass analysis is that group [earnings before interest, tax, depreciation and amortisation] could decline by 15 per cent, before allowing for any potential price increases as a result of the reduced supply,” said Edward Sterck, analyst at BMO Capital Markets.
“However, PGM prices are running well above our base case forecasts and it seems likely that production cuts of these magnitudes are likely to stimulate further positive price responses.”
Palladium hit a record above $2,800 an ounce early this year as carmakers scrambled for supplies of the metal, which is used to reduce harmful vehicle emissions.
Before Friday’s news, Amplats was forecasting a deficit in the market of 1.9m ounces of palladium this year, saying carmakers needed more of the metal in their catalytic converters to meet air pollution standards.
Amplats said the A unit at its Anglo Converter Plant in Rustenburg, 88 miles from Johannesburg, was damaged by a coal dust explosion in February. A back-up unit was set to take over but water was recently detected in its furnace.
“This poses a high risk of explosion and the company has determined that it has no other option but to temporarily shut down the phase B unit to ensure the safety of all emp
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