Fuel cell battery vehicles, driven by Chinese demand, will help drive demand for platinum group metals. From Moneyweb.
A 71% increase in the PGM (platinum group metal) basket price boosted Anglo Platinum’s earnings by 39% for the 2020 financial year.
This was despite the setbacks of the Covid lockdown which dropped PGM production by 14% to 3.8 million ounces (oz), and an explosion at a key converter plant which dropped refined production by 42% to 2.7 million oz. The first phase of the converter plant was restored to production in November last year, within budget and ahead of schedule.
Strong PGM prices and a weaker rand helped brush these setbacks aside, resulting in a 39% increase to R41.6 billion in Ebitda (earnings before interest, tax, depreciation and amortisation).
PGM basket prices increased to R33 320 per ounce sold from R19 534 in 2019.
Anglo Platinum reported a strong recovery in the second half of 2020, with own-mines production up 1% compared to the same period in 2019 (adjusting for the sections at Amandelbult that came to their end of mine life).
Converter plant stoppage, rebuild
Refining on behalf of third party contractors was seriously impacted by the stoppage at the converter plant.
Some R500 million was expended on restoring the first phase of the downed plant. The second phase unit is now undergoing its full rebuild, which is scheduled to be completed in the second half of 2021 at an estimated capital cost of R550-R600 million.
The interruption at the converter plant resulted in a build-up of work-in-progress inventory of around one million PGM ounces. It is expected that this inventory will be released by the end of 2022.
Demand for light vehicles dropped 14% last year but is now back to near normal levels, led by demand from China. Demand was further underpinned by a 5% increase in PGM per light vehicle manufactured.
Jewellery demand is weak, but recovering, while industrial and investment uptake held up surprisingly well in an otherwise trying year.
The long-awaited lift-off of the hydrogen economy is critical to the future of platinum mines, with 109 corporate members of the Hydrogen Council and nine new national hydrogen strategies announced – all aimed at reducing carbon output using hydrogen-based technologies.
A green future for PGMs
Signalling its commitment to green energy, Anglo Platinum CEO Natascha Viljoen says the group will pilot its first hydrogen fuel cell truck in the first half of 2021, leading eventually the replacement of all diesel-powered trucks at the Mogalakwena mine.
Also being considered is the use of hydrogen fuel cells as a source of energy for processing facilities across the group.
The building of a 75MW photovoltaic plant at Mogalakwena mine will reduce carbon emissions by up to 25%.
The plan is to scale this up substantially in the coming years to reduce dependence on the Eskom grid as well as scale back carbon emissions.
Costs per unit up 15%
The 14% drop in mining production had a flow-through effect on unit costs per PGM ounce, which increased by 15% to R11 739 (2019: R10 189). By the fourth quarter of 2020, all Anglo Platinum mines were operating at 100% of normal capacity.
Buoyed by a weaker rand and strong PGM prices, the group’s Ebitda margin was hoisted to a robust 55%, up from 43% the previous year.
Net sales revenue increased by 38% to R137.8 billion (2019: R99.6 billion), mainly due to an improvement in PGM prices and higher sales from trading activities. This more than offset the supply disruption to customers following the temporary closure of the converter plant.
Return on capital employed increased to 72% (2019: 58%), and the company’s net cash position improved to R18.7 billion (2019: R17.3 billion).
A final dividend of R35.35 per share, or R9.4 billion, was declared – based on a payout ratio of 40% of headline earnings.
Source: Anglo Platinum 2020 results presentation
All heavy trucks sold in China and India by 2023 will need platinum-based catalysers, though many manufacturers are implementing these targets ahead of time. Platinum loadings in Chinese trucks will be three times higher in 2023 than in 2019, with a similar trend emerging in India.
Source: Anglo Platinum 2020 results presentation
Looking to the future, Viljoen says by 2022 all operations will be mechanised or modernised with a view to improving safety and pushing the group into the lower half of competitors’ cost curve. New and safer technologies are being employed to improve safety, such as emulsion-based blasting and winch operations developed in-house to halt operations when workers get too close.
PGM production is expected to return to pre-Covid-19 levels of 4.2-4.6 million oz in 2021, while refined production is expected to reach 4.6-5 million oz. PGM sales volumes are forecast to be in line with refined production. Unit costs are expected to remain between R11 000 and R11 500 an ounce.
Total capital expenditure is expected to be R7-R7.5 billion, not counting capitalised waste-stripping expenditure of R2.8-R3.1 billion.
“The supply and demand for PGMs are both forecast to rise in 2021 compared to 2020,” says the group.
“This was always likely as both have already improved significantly since the first half of 2020, mainly owing to the world learning to live with Covid-19.
“The rollout of effective vaccines now suggests further upside, though how soon they bring the promise of ‘normality’ will vary by country and sector and, in some cases, ‘normality’ will be different than it was before the pandemic.
“We expect palladium and rhodium to remain in deficit this year. Platinum is forecast to be in a small surplus.”