Amplats puts mines up for sale

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Johannesburg - Anglo American Platinum, the world’s largest producer of the metal, said it will seek buyers for some mines after first-half profit dropped 88 percent because a five-month strike in South Africa disrupted mining. Amplats, as the Johannesburg-based unit of Anglo American is known, is putting four mines and possibly two joint ventures up for sale, it said in a statement today. It will retain the Mogalakwena open-cast mine, the company’s largest, three other operations and four stakes in joint ventures. Amplats has had “a number of suitors” for the assets, chief executive Chris Griffith said on a conference call. “We are in the early stages of the process, so there’s no specific timeline to completion at present,” he said.

“We are already in consultation with government.”

The strike by more than 70,000 miners at Amplats, Impala Platinum and Lonmin cost the companies 23.9 billion rand in revenue and workers 10.6 billion rand in wages by the time it ended of June 24.

The stoppage pushed South Africa’s economy into a first-quarter contraction as mining output plunged in the country that accounts for more than two-thirds of the platinum extracted globally.

Amplats said in January 2013 it planned to sell the Union mine and concentrators, north of Rustenburg.

The company has yet to find a buyer for those assets.

Mechanisation Push

“We will create a company that delivers the majority of its production from mechanised mines” and “operates in the lower half of the cost curve,” the producer said in today’s statement.

The proposed sales will cut its workforce by more than half, reducing the headcount of 50,000 by about 27,000, Griffith said.

Amplats intends to exit its three Rustenburg operations and the Pandora joint venture.

It will retain the remaining smelting and refining assets at both Union and in Rustenburg, today’s statement shows.

It will consider selling its stake in the Bokoni venture with Atlatsa Resources.

“I don’t think there will be that many buyers going around,” Albert Minassian, an analyst at Investec in Cape Town, said by phone.

“Even if they sell at a reduced price, the shares may rise because they’re getting rid of something that’s problematic.”

Amplats rose as much as 1.1 percent, and was 0.3 percent higher at 458.72 rand at 10:05 a.m. in Johannesburg.

The stock has advanced 18 percent this year.

Earnings per share excluding one-time items fell to 60 South African cents in the six months, from 5.14 rand a year earlier, Amplats said today.

Net income dropped to 157 million rand from 1.3 billion rand in 2013, it said.

Customers Supplied

Platinum sales decreased to 1.04 million ounces from 1.07 million ounces a year earlier as output slumped 39 percent to 715,200 equivalent refined ounces.

Amplats used stockpiled metal to meet its commitments to users during the strike.

“Contractual supply to customers was uninterrupted,” Amplats said.

Cost of sales increased 27 percent to 26.9 billion rand as the company spent 4.1 billion rand on its strike-hit operations without deriving revenue from sales, Amplats said.

Platinum for immediate delivery fell 7.1 percent to an average $1,438 an ounce in the first half compared with a year earlier.

“Demand growth and significantly reduced South African mining supply due to the strike will result in a platinum market deficit of more than one million ounces,” the company said.

Capital expenditure increased 17 percent to 2.8 billion rand and no dividend was paid, Amplats said.

Refined output and sales will be two million to 2.1 million ounces because Amplats expects its post-strike production to reach a “steady state” by the fourth quarter, it said.

The company previously estimated production at 2.1 million ounces. - Bloomberg News