JOHANNESBURG (miningweekly.com) – Struggling platinum major Anglo American Platinum (Amplats), which is reeling from a R264-million “bloodbath” loss for the first six months of 2012, is against the formation of a potash-type single-channel marketing organisation to stabilise falling prices.
Instead, acting Amplats CEO Bongani Nqwababa favours greater market discipline and consolidation of the platinum-mining industry, which he says has been fragmented as a consequence of lower barriers to entry.
Pan-African Capital CE Dr Iraj Abedian last month expressed the view that without a Canpotex-type single-channel marketing system, South Africa’s platinum-mining industry would continue to face the risk of boom and bust.
Canada’s marketing and logistics company Canpotex – which was established 40 years ago when potash mining faced a price crisis similar to the one currently dogging platinum – sells and delivers Saskatchewan potash to international markets as a wholly owned entity of potash producers.
Abedian contends that, as the dominant platinum supplier, South Africa is commercially obliged to ensure constant global access to the metal, which it can only achieve if there is supply, price and employment stability.
But Nqwababa says that the imposition of a potash-type floor price for platinum flies in the face of free-market forces.
“Let the market forces be at play and let there be greater market discipline in the industry,” says Nqwababa.
His hypothesis is that the industry is being ravaged by fragmentation and the lack of market discipline; he is against forcing prices, which he considers unsustainable.
“The last thing you need is to create market anxiety and then force people to look at alternatives,” Nqwababa tells Mining Weekly Online in a video interview.
He believes that rising platinum recycling could also undermine a platinum exchange and points out that recycling already accounts for two-million ounces of yearly supply and is expected to double to four-million ounces in the next ten years.
Amplats is placing emphasis on market development, geographic demand diversification and overhead cost stripping, following a 78% fall in headline earnings a share, which saw the suspension of the interim dividend.
The 58 000-employee JSE-listed company, which is undergoing an in-depth strategic review until December, has lowered its refined sales target to between 2.4-million and 2.5-million platinum ounces and lopped R700-million off its capital expenditure budget, taking it to R7.3-billion from the R8-billion in February and R9-billion last year.
Net debt has more than doubled to R9.5-billion from R4.3-billion - 119% up - and operating free cash flow was down 155% to R2.6-billion from R4.7-billion for the six months to June 30.
Operating profit lowered 66% to R2.2-billion and net sales revenue fell 22% to R19-billion from R24-billion.
"It's a bloodbath, as you can see," Nqwababa commented during the presentation of results.