JOHANNESBURG – Struggling Anglo American Platinum (Amplats) is going headlong into market development, geographic demand diversification and overheads stripping as it reels from a R264-million "bloodbath" loss in the first six months of 2012.
“It’s all about market development and looking at better opportunities for the metal, increasing the demand and diversifying the geographies in which it is used.
“At the same time, we’re having a brutal focus on our cost structure to make sure that it’s reduced to the bare minimum,” Amplats acting CEO Bongani Nqwababa tells Mining Weekly Online in a video interview (see attached).
Nqwababa, who fielded a barrage of intense analyst questioning with aplomb as a short-notice stand-in for Neville Nicolau, who has resigned, says there has been over-reliance on Europe, which points to the need for the geographical diversification of demand.
On the platinum industry’s endemically high overheads, Nqwababa says the industry’s high costs are a consequence of times of plenty.
“It’s a rich-child syndrome,” he adds.
He sees the current crisis in platinum as an opportunity to work intensively to reduce overheads to a sustainable level.
Before even one of the company’s 58 000 jobs is cut, Nqwababa wants to see every bit of fat removed from the structure of the company.
“Before we look at the operations, we should make sure that we are lean, mean and fit,” Nqwababa advocates.
Should worker retrenchments need to take place, Amplats intends emulating the Marikana model, which resulted in the redeployment of all but 42 of the 1 800 employees impacted when the Marikana mine was placed on care-and-maintenance.
“As we rightsize our operations, we’ll be solution-focused and sensitive to the needs of stakeholders,” he tells Mining Weekly Online in the video interview.
On the Amplats crisis putting its loan-repaying black economic-empowerment (BEE) partners under water, Nqwababa sees a joining of forces by BEE juniors and mid-tier participants as a possible solution.
He is convinced of platinum’s strong future in a low-carbon world that is trending towards the widespread use of fuel cells, which have a high platinum loading, four times that of autocatalysts.
Amplats is working with a US company to develop the fuel-cell market, lower production costs and then move fuel-cell production to South Africa, just as was done with autocatalysts.
Hydrogen fuel cells using platinum catalysts are seen as efficient, versatile and scaleable; they represent a proven technology that ensures clean, reliable and cost-effective power.
Nqwababa would also like to see expansion of other modern uses of platinum group metals in association with products like light emitting diodes, for example.
Amplats is already in discussion with the Limpopo provincial government about the creation of a Platinum Valley, a platinum-industry equivalent of the much-celebrated Silicon Valley of the US, to give the platinum industry the chance to emerge stronger than ever from the current crisis.
REVIEW UNDER WAY
Since Amplats announced its in-depth strategic review in January, the operating environment for platinum producers has deteriorated, which has resulted in Amplats intensifying its focus on value rather than volume.
Its “five buckets of value “ now include industry-leading cost performance and the fast-tracking of the most profitable ounces.
The primary objective of the company is to remove unprofitable ounces from the market and it will no longer be delivering loss-making ounces into a market that is in surplus.
While its long-term review is under way, Amplats has cut its capital-expenditure target by another R700-million to R7.3-billion from the R8-billion announced in February and also further reduced its refined production target.
It now intends to refine and sell between 2.4-million and 2.5-million platinum ounces in 2012, down from a higher 2.6-million ounces in the past.
The new unit-cost target for the full year is R15 000 per equivalent refined ounce, reflecting the higher fixed-cost nature of the business and the ongoing input-cost inflation.
UNDERLYING FINANCIAL PERFORMANCE
Net debt has more than doubled for R9.5-billion from R4.3-billion - 119% up - and operating free cash flow is down 155% to R2.6-billion fron R4.7-billion.
Headline earnings a share fell 78% to R2,73c/share, operating profit was down 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.