While Ukraine war, recovery in auto sector and rising demand for electric vehicles undergird PGM prices. From Moneyweb.
Ongoing electricity outages could dent Anglo American Platinum’s (Amplats) refined production by up to 5% in 2023, the group’s outgoing CEO Natascha Viljoen said on Monday in announcing the company’s latest annual financial results.
In October last year Amplats warned that Eskom power outages had impacted its processing facilities, leading to a loss of production and an increase in built-up work-in-progress inventory of 40 400 PGM (platinum group metal) ounces.
By December, the inventory back-up was reported at 100 000 ounces due to load shedding and delays in bringing its Polokwane smelter back online.
After running a number of different scenarios, the group concluded that the first half of 2023 will most likely reflect the load shedding patterns of the last two months.
This could impact refined production by 5% in 2023, which is within the 3.6-4 million ounces guidance issued by the group in December.
Viljoen warned of lower first half refined production in 2023 due to the ramp-up at the Polokwane smelter, which has completed a major rebuild, and lower concentrate grades from its Mogalakwena mine. The slack in Polokwane’s production was picked up to some extent by the group’s other two smelters at Mortimer and Waterval.
Read: Natascha Viljoen, breaker of glass ceilings, to leave Anglo Platinum
Amplats produced four million PGM ounces in 2022. The two largest mining operations, at Mogalakwena and Amandelbult, suffered several headwinds, including high rainfall and lower grade recoveries at Mogalakwena.
The Mototolo and Unki mines were standout performers, increasing mining activity to feed the concentrators’ expanded capacities after a major debottlenecking exercise.
“We have a strong contribution to mining Ebitda [earnings before interest, tax, depreciation and amortisation] from all our own-mine operations and achieved a mining Ebitda margin of 57%,” said Viljoen.
The US dollar PGM basket price for 2022 was $2 551, 8% lower than in 2021, though in rand terms this was the highest ever basket price achieved.
Source: Amplats 2022 results presentation
In rand terms, revenue for 2022 was down a quarter to R164.1 billion (2021: R214.6 billion), with a 38% drop in headline earnings per share to R185.42 (2021: R300.42).
Dividends for the year totalled R115 per share (2021: R300), equivalent to a 62% payout of headline earnings.
Read: Amplats cuts dividend payout again as load shedding crimps profit
Cash costs for the year increased 11%, against SA mine inflation of 18%. The biggest inflation drivers were electricity (11%), maintenance (16%) and consumables (25%) – with oil increasing by more than 60%.
Amplats managed to reduce energy consumption by 5% to counteract rising energy prices, which will continue into 2023 as Eskom has been awarded a tariff increase of 18.7%.
PGM prices were undergirded by a post-Covid recovery in the auto market, which analysts forecast will increase production 4-6% in 2023 over 2022.
Low inventories and pent-up demand driven by high employment and China’s reopening of its economy is fuelling car sales, though there are some bumps on the horizon in the form of rising interest rates and a potential recession.
Global car sales have yet to return to levels last seen in 2019, prior to the Covid outbreak.
Capex estimates for 2023 show that up to R23 billion will be spent, with R10 billion to R11 billion earmarked for ‘stay in business’ projects, R3.5 billion for life extension and R4.4 billion on growth.
Hydrogen economy
Global PGM supply from mines fell in 2022 and is likely to fall further in 2023.
The coming hydrogen economy and switch to electric vehicles will push the platinum market into deficit from 2024 onwards, said chief financial officer Craig Miller.
Supply and demand for palladium will be in near equilibrium in 2023, followed by a surplus as production of gasoline vehicles starts to reduce thereafter. Rhodium supply is expected to show a deficit in 2023, returning to a supply-demand balance thereafter.
Read:
Anglo American earmarks another R3.4bn for zero emissions truck project
Anglo American to champion development of SA’s ‘hydrogen valley’
Amplats is pioneering the hydrogen economy as a clean energy source, commencing with a small bus project and limited third-party truck trial. This trial takes place in 2023 and will make use of extra hydrogen capacity at the Mogalakwena mine.
The second trial phase in 2024 involves the deployment of about 50 trucks and 50 buses, sufficient to develop a refuelling network along the Durban to Johannesburg N3/N1 routes.
By 2028, the third trial phase will allow for a much larger deployment of hydrogen vehicles, creating the first viable public network.
Some 500 trucks and 300 buses should be able to operate along the freight corridor extending from Gauteng to the Durban Port.
