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Amplats sees limited platinum-supply growth as profits dive

Johannesburg - Anglo American Platinum [JSE:AMS] said growth in supplies of the metal will be limited this year as capital spending is constrained amid low prices. The world’s biggest producer reported a 58% drop in first-half profit.

Headline earnings were R1.04bn ($73m) in the six months to June 30, compared with R2.47bn in the same period in 2015, the Johannesburg-based company said in a statement Monday. The average platinum-group metals basket price sold dropped 24% to $1 632 an ounce from a year earlier. Lower inventory levels relative to last year also reduced profit.

“Similar to 2015, platinum markets are expected to remain tight,” Chief Executive Officer Chris Griffith said in the statement. “Capital investment decisions have been delayed to after 2017, and will be dependent on market demand for additional ounces.”

Amplats, majority-owned by London-based Anglo American [JSE:ANG], is selling and winding down its older, less-profitable mines as it seeks to cut costs and adjust to a platinum price that has fallen by more than half over the past five years. The company has identified R1bn of costs savings through reducing 400 managerial positions, it said.

Output forecast

Production of refined platinum was 1 million ounces in the period, compared with 1.1 million ounces a year earlier. Net debt fell 23% to R9.9bn. Full-year output will probably be at the upper end of Amplats’s forecast range of 2.3 million to 2.4 million ounces, it said. The company slightly reduced its capital-expenditure estimate range to R3.5bn to R4bn from R3.7bn to R4.2bn.

Parent Anglo American, which is also selling assets, has indicated its willingness to hang onto Amplats, stating that platinum will be one of its three core commodities, along with copper and diamonds.

Platinum has climbed 22% this year after touching a seven-year low in January.

One of Amplats’s key challenges this year is to settle wage negotiations in South Africa, where employees went on a record five-month strike in 2014. The Association of Mineworkers and Construction Union, which led the walkout, said this month it wants a 47% increase in basic pay for the lowest earning workers to R12 500 a month.

The country’s annual inflation rate was 6.3% in June.

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