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Amplats gets leaner and meaner

Feb 19 2017 06:02
Dewald Van Rensburg

An Amplats worker (AFP)

Company Data

Sibanye Gold Limited [JSE:SGL]

Last traded 28
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Cumulative volume 10331566
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Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA


Last traded 1176
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Cumulative volume 272924
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Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Johannesburg - Anglo American Platinum (Amplats) this week consummated the last major transaction on its way to becoming a far smaller, but more profitable, company.

Like other parts of the Anglo American group, Amplats [JSE:AMS] is focusing on paying debts and bringing in all the cash it can.

This means no dividends and no new projects, along with selling assets and now also negotiating prepayments with customers.

The company’s net debt fell from R12.8 billion at the end of 2015 to R7.3 billion at the end of 2016.

A large part of the cash for this debt reduction came from getting a new customer to prepay for platinum delivered over a six-month period, providing R2 billion cash upfront in the financial year for which the company released results.

These 2016 results include the Rustenburg mine complex and other noncore assets for the last time, but still reflect the outcome of Amplats’ vigorous restructuring over the past few years.

The R12.4 billion loss posted in 2015 was mostly as a result of write-offs.

However, headline earnings – a metric excluding the effects of write-offs – amounted to R1.9 billion in 2016, compared with a small headline loss of R126 million.

In the course of 2016, Amplats sold its Rustenburg mines to Sibanye Gold for an initial R1.5 billion cash – and a possible R3 billion more, depending on how Sibanye fares with these mines.

Amplats’ other sales are nearing completion, including the sale of its 42.5% stake in Pandora mine to Lonmin and selling parts of the long-dated mineral resources of its Amandelbult mine to Northam Platinum for R1 billion.

A 50% share in the Kroondal mine is considered noncore, but there are no talks to sell it to anyone at this point, the company said.

Amplats also announced the sale of another mine, Union.

The buyer is Siyanda Resources, an unlisted black-majority mining company with a variety of mining assets, chief among which is a stake in Kalahari Manganese.

All these deals come with shares for Amplats in future cash flow for a few years.

All the asset sales also come with refining deals that will see Amplats buy the mines’ concentrate and continue to refine and market the metal itself.

After a few years, these convert into toll-refining agreements, whereby Amplats refines the metal for a fee and then gives it back to the other mining companies.

At a presentation this week, CEO Chris Griffith said the toll-refining deals were more beneficial to Anglo than the initial concentrate-buyer deals.

While Amplats is selling much of its mining portfolio, it will remain king of the hill as far as the production of refined platinum is concerned, because it is retaining all its smelting assets.

In 2016, it produced 2.33 million ounces of refined platinum, of which 28% was from other companies’ mines.

According to spokesperson Mpumi Sithole, after completing the sale of Union, Amplats will produce roughly 2.4 million ounces, of which 38% will emanate from other mines.

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