FYI. Mining Journal - August 14, 1998, Volume 331. No.8493
Lead Story:
PGM producers make hay
Amidst the general gloom in metals and their associated equity markets, the prices of platinum group metals (PGMs) have been one of the few bright spots in recent months. Palladium prices, in particular, have rallied on actual or feared restrictions to Russian sales, and platinum has also benefited (MJ, March 27, p.250). Anglo American Platinum Corp.(Amplats) this week announced an 85% increase in headline earnings for the year to June 30, 1998, to R1.12 billion. Total net earnings, which include exceptional items, rose by 171%, as the group received an additional R518.7 million boost from the sale of interests in diamond trading companies to other parts of the Anglo American group. The chief executive, Barry Davison, celebrated the result as "the best ever" that the company has achieved, but noted that it was sad that it was reported in a week in which stock markets around the world were generally falling.
The improvement in Amplats' profit was driven from the revenue line,
with gross sales rising by 30% compared with the preceding year, to
R6.24 billion. Refined platinum output rose by 9.4%, to 1.9 Moz. The
company calculates that 34% of the increase in sales revenue was due to higher US dollar prices for PGMs, 21% to the higher output and 45% to the depreciation in the value of the rand. Much of the currency's fall came towards the end of the 12-month period, and Mr Davison predicted that, assuming PGM prices remain around their current levels and the rand stays below US$/R6, then Amplats will make a further "significant increase" in profit in the next 12 months.
Amplats is currently generating a considerable positive cash flow. Cash and equivalents had risen to R2.1 billion by the end of June, but Mr Davison ruled out share buy-backs or special dividends, preferring to use the money to fund new projects, such as the Potgietersrust expansion and the new Bafokeng Rasimone mine already under way (MJ, April 18, 1997, p.301), and for other, unspecified opportunities. He confirmed that Amplats is in discussion regarding Northam Platinum but refused to drawn on the implications of a possible acquisition, noting only that the company's property is contiguous with Amplats' Amandelbult section, which he believes will enable Amplats to "add value".
Northam has struggled with mainly technical problems most of its life,
and has accumulated R2.4 billion in unredeemed tax allowances. However, the strength of PGM prices and the weak rand helped the company make its first significant quarterly profit in the June period (MJ, July 31, p.95). The other main South African pure PGM producer, Impala Platinum, is scheduled to report next Wednesday (August 19).
The only primary PGM producer in North America, Stillwater Mining
Co., is also benefiting from higher prices. Last month, the company
reported net income for the six months to June 30 of US$4.0 million,
compared with a loss of US$2.9 million in the first half of 1997. Again, the improvement started at the revenue line, as sales rose by 25%, to US$48.0 million. The rise, obviously without any exchange-rate
assistance, was due principally to higher palladium prices, the company's dominant product, and came in spite of the continued effects of hedging put in place by the company when palladium prices were weaker and not expected to rise (MJ, May 22, p.393). Stillwater received an average of US$174 /oz for its 164,000 oz of palladium in the first half of 1998, compared with an average spot price of US$281/oz, but still 10% higher than the price received in the first half of 1997.
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