Our opinion on the current state of AMPLATS(AMS)Anglo American Platinum (AMS), commonly known as Amplats, is the world's second-largest platinum producer, after Sibanye, and plays a significant role in the platinum group metals (PGM) industry. Owned 77.62% by Anglo American, Amplats has undergone a significant transformation over the past few years, moving away from deep-level mining toward more efficient, mechanized operations. This shift has seen the company reduce its number of mines from 18 to 7 and cut overheads and employee numbers by 50%, making its operations more streamlined and cost-effective.
Amplats' Mogalakwena open-cast mine is a particularly standout operation due to its palladium-rich deposits and production costs, which are among the lowest in the global PGM industry. The company's ongoing projects at Mogalakwena aim to boost platinum production by 250,000 ounces and palladium production by 270,000 ounces. Additionally, Amplats acquired Glencore's 40.2% stake in their joint venture at the Mototolo mine and the adjacent Der Brochen property for R1.5 billion. The Mototolo operation is highly mechanized and shallow, allowing for efficient expansion into Der Brochen without the need for extensive new infrastructure.
Despite its successes, the platinum market faces challenges from the recycling industry, which recovers approximately 2 million ounces annually from old auto catalysts, contributing to downward pressure on prices. While Amplats is considered the best of the PGM shares on the JSE, it remains highly volatile due to its exposure to commodity price fluctuations.
In its plans to boost production at Mogalakwena, the company intends to relocate 1,000 families, which could lead to unrest among workers and communities. In December 2021, Amplats announced a R3.9 billion extension to the life of its Mototolo/De Brochen mines, projecting operations to continue beyond 30 years. The company also faced a significant leadership change with the resignation of CEO Natascha Viljoen in February 2023, although she will serve out her 12-month notice period.
Amplats' financial performance for the six months ending 30th June 2024 reflected challenging market conditions:
- Tonnes milled down 7%
- Production of refined PGMs up 5%
- Revenue down 19%
- Headline earnings down 18%
The company attributed this performance to the 24% decline in the PGM dollar basket price, driven by lower prices for palladium (down 34%) and rhodium (down 49%).
In an update for the third quarter to 30th September 2024, the company reported:
- PGM production from own-managed mines down 9%
- PGM sales volumes up 16%
- Production guidance for 2024 remained at 3.3-3.7 million PGM ounces, while refined production guidance was revised up to 3.7-3.9 million ounces.
The stock remains highly speculative and volatile, closely tied to international PGM prices. Technically, the share had been falling since March 2022 due to challenges like load shedding and declining PGM prices. However, a technical upward break through the long-term downward trendline occurred on 4th October 2024 at 66,766c. Since then, the share price has risen to 74,957c.
On 19th February 2023, Amplats announced potential retrenchments of 3,700 employees, and on 23rd July 2024, Business Day reported that Amplats was considering a listing on the London Stock Exchange (LSE). This potential move could increase its visibility and attractiveness to international investors, providing further opportunities for growth.
