Amplats reports a fall in annual earnings, but a stellar year on mine safety

20 Feb 2023

Anglo American Platinum (Amplats) had its best safety year ever in 2022, with no employee killed on the job at the mines it manages. Meanwhile, the full-year earnings for the Anglo American unit fell from record levels on lower prices and grades and maintenance issues, but were still its second-best ever. Looking ahead, the surge in power blackouts may have a material impact this year.

Earnings results are always compared to the previous reporting period, but that can sometimes be deceptive. For example, no one died last year in an industrial accident at work on a mine that Amplats managed, and you can’t really put a price on that. It was the company’s best calendar year on record for safety, mirroring the overall sector’s record safety year.

Read more in Daily Maverick: “Accidental deaths in SA mines fall to record low of 49 in 2022”

At first glance, its earnings for 2022 look a damp squib compared with 2021. Adjusted Ebitda – earnings before interest, taxes, depreciation and amortisation – were down 32% to R73.9-billion. The dividend per share was 62% lower to R115/share or R30-billion. And so on.

But context is everything and 2021 was an absolutely blockbuster year for Amplats, with record earnings from record prices. That was always going to be a hard act to follow, and 2022 marked its second-best annual earnings on record.

That’s still a podium finish, though the market was not all that impressed.

The company’s share price was down 3% in late afternoon trade on Monday, compared with slight gains for its peers. The dividend was a total payout ratio of 62% of headline earnings, and maybe investors were hoping for more cash back.

“This financial year has seen us navigate a complex operating environment, with macro-economic challenges, supply chain disruptions, socioeconomic unrest, and electricity load-curtailment, as well as some operational headwinds of our own. However, we have seen good levels of resilience across our operations,” said CEO Natascha Viljoen.

Prices were a mixed bag last year, with the dollar price for the basket of platinum group metals (PGMs) Amplats produces down 8% compared with 2021. But a weaker rand meant the rand basket price nudged 2% higher to a record high.

Lower grades – which refer to the amount of metal per tonne of rock mined – at the jewel in Amplats’ crown, its mechanised Mogalakwena mine, and delays in the planned rebuilding of its Polokwane smelter because of “substandard materials”, impacted sales and reduced revenue by 24%. Cost inflation also ate into margins.

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The company’s socioeconomic contribution in 2022 – from wages and salaries, taxes and royalties, local procurement, capital investment and dividends – amounted to R131-billion, underscoring the sector’s importance to the wider economy.

Looking ahead, the company is concerned that the scale of load shedding could cut its guidance of four million ounces in refined sales by 5%.

There is no let up to Amplats’ safety drive and Viljoen said the company was on track with a project to roll out hand-held radar devices to detect falls of ground – long the leading killer in South Africa’s deep and dangerous mines – in advance. Read more here.

“The development of that technology is progressing well. It needs to go through rigorous testing and our Standards Committee is looking at it at the moment, and the moment we get all the tests done we will roll it out with speed,” Viljoen told Business Maverick in an interview.

The National Union of Mineworkers has publicly called on the industry to adopt such technology.

Read more in Daily Maverick: “NUM General Secretary calls on mining companies to adopt radar technology as a safety measure”

Viljoen also noted that the company’s last major conventional mine, Amandelbult, had not had a fatality in the past two years. Most of the group’s assets are now mechanised.

“It took a lot of effort to make that happen,” she said, pointing to other safety initiatives in netting and blasting which are being rolled out across the group’s operations.

In an age when ESGs – environmental, social and governance issues – are all the corporate rage, mining safely has become critical to a company’s profile. Investors don’t want their dividends drenched in the blood that soaked them in the past.

This will also likely be the last set of full-year Amplats’ results that Viljoen presents. She will step down within 12 months – her notice period – to take on the role of Chief Operating Officer at US-based miner Newmont, the world’s largest gold producer.

Viljoen told Business Maverick that the timing would hinge on when the company finds her successor, a process that has already started with an eye to her being there for the handover and transition. She anticipates being at Amplats for at least another six months.

The mothership, Anglo American, will unveil its results on Thursday. DM/BM

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